Key Takeaways:
The reopening of the Strait of Hormuz on Friday will unleash a wave of stranded crude supply into global markets, but the return to normal shipping flows will take months.
Brent crude fell below $78 a barrel Monday to its lowest in more than three months, extending a 15% slide over the past four sessions, as traders priced in the release of millions of barrels of oil trapped in the Persian Gulf since late February. The U.S.-Iran interim deal, scheduled for formal signing Friday in Switzerland, calls for the immediate removal of the U.S. naval blockade and the resumption of Iranian oil exports.
"The statements by the U.S. and Iran are currently unclear and do not offer sufficient information regarding key aspects such as timings and safe routes," Jakob Larsen, chief safety and security officer at the Baltic and International Maritime Council, said in a statement. "We advise shipowners to continue doing thorough risk assessments and appeal to all parties to put the safety of seafarers first."
More than 220 oil tankers and nearly 500 vessels total remain anchored in the Persian Gulf, according to Kpler vessel tracking data. Only 0% to 10% of normal oil flows have been transiting the strait during the blockade, according to Rapidan Energy Group. Four ships — including two supertankers capable of hauling 2 million barrels each — have switched on their transponders and begun moving toward the strait, Bloomberg vessel tracking data show. Still, Matt Smith, lead oil analyst at Kpler, said it will likely take three to four months before traffic can be considered normal.
The supply overhang will test OPEC+ cohesion
The sudden release of stranded supply comes at a delicate moment for oil markets. Before the war, the Strait of Hormuz handled about 20 million barrels per day of crude and petroleum products — roughly a fifth of global consumption. More than four-fifths of that flow was destined for Asian markets, where countries including Japan, South Korea, and India have been drawing down strategic reserves and rationing power during the blockade.
The last time a comparable supply disruption reversed — after the 2019 attacks on Saudi Aramco's Abqaiq and Khurais facilities — oil prices normalized within weeks as Saudi Arabia restored production. The current situation is more complex: the blockade has lasted more than three months, and the logistics of clearing the strait of naval mines, securing insurance coverage, and reestablishing supply chains will take considerably longer.
Maritime insurers including Skuld have confirmed they have not changed their war-risk coverage limitations for the strait. Without insurance, most commercial vessels will remain anchored until safe passage is proven, creating what Kpler's Smith described as a "chicken-and-egg situation."
Iran stands to gain significant financial relief under the interim deal. The draft memorandum of understanding, seen by Bloomberg News, grants Iran immediate authorization to export crude and petrochemicals, access to a $300 billion economic development program, and the eventual release of frozen assets. The U.S. Treasury Department will issue sanctions waivers immediately after Friday's signing. The 60-day negotiation period that follows will address Iran's nuclear program and the war between Israel and Hezbollah in Lebanon.
For Asian economies that bore the brunt of the crisis, the reopening offers near-term relief but lingering economic scars. Liquefied natural gas prices in Asia are indexed to oil with a three- to six-month lag, meaning the $100 oil price seen in March will only fully feed through to gas bills later this year. Supply chains for naphtha, fertilizer, and other petrochemical byproducts — disrupted for months — will take at least a year to normalize, according to Haruhiko Sakaino, an adviser to Japan's Agency for Natural Resources and Energy.
This article is for informational purposes only and does not constitute investment advice.
