The end of the war in Iran will provide immediate relief to oil and natural gas markets, but it may take months for prices to return to pre-conflict levels.
Shipping companies and insurers will need assurance that the vital Strait of Hormuz is safe to navigate, which carries about a fifth of the world’s oil supply. Even after tanker transits resume, it will take time to clear the backlog with nearly 2,000 vessels stuck in the Persian Gulf.
The war has closed numerous oil and gas facilities, and restarting production could take weeks. Repairing damage from attacks on production sites could extend the recovery time to months or even years. QatarEnergy, the largest producer of liquefied natural gas, reported a 17% reduction in export capacity due to Iranian missile attacks, with repairs estimated to take up to five years.
Aliko Dangote, founder of the Dangote Group, predicts it will take six months for oil supply to return to normal once the war ends. He anticipates oil prices stabilizing but remaining around $75-80 for the remainder of the year.
Before the US and Israel’s attack on Iran on February 28, a barrel of Brent crude oil was trading at $73, while WTI, the US benchmark, was at $67 per barrel. Tensions between the US and Iran had already led to price increases earlier in the year.
Gasoline prices in the US have risen significantly in response to higher oil prices, and they are expected to decrease more slowly than they rose.
