Hormuz deal changes nothing — Why global oil prices may not return to normal

Benchmark prices swung from below $70 a barrel to a peak of $144 before crashing and rebounding again. Global inventories are draining at a record pace. Refineries in East Asia have been forced to idle. And now, after months of tension, there may finally be a way out.

A possible agreement between the United States and Iran is now being closely watched around the world. If it moves ahead, it could reopen the Strait of Hormuz and restart nuclear talks. That would bring a large amount of oil back into global markets after months of disruption. 

But experts say things will not return to normal quickly. The oil market could shift in a big way.

What is already clear is that the global oil system (shippers, insurers, producers, and oil-importing governments alike) has been forced to update its assessment of a risk that was long treated as improbable. The Strait of Hormuz is no longer a theoretical vulnerability. It is a demonstrated one.  

Why reopening the Strait of Hormuz will not restore normal oil trade immediately 

The biggest immediate effect of any deal would be supply. More oil could start flowing again through one of the world’s most important shipping routes. Still, experts say this is not a simple return to stability. The post-war oil system itself is still being defined. When Hormuz was effectively shut down during the crisis, Gulf countries were forced to cut production, removing millions of barrels per day from the market. 

The International Energy Agency (IEA) says total lost supply from Gulf producers has already crossed 1 billion barrels by mid-May 2026. Because of the disruption, global oil output is expected to fall by about 3.9 million barrels per day in 2026, reaching roughly 102.2 million barrels per day, assuming shipments slowly restart from the third quarter. 

The US Energy Information Administration (EIA) has a similar view. It says even if the Strait reopens in late May or early June, full recovery of production and trade could take until late 2026 or even early 2027. 

Clearing naval risks, restarting tanker movement, and bringing closed production back online will all take time. The IEA also estimates it could take at least two to three months just to restart stable export flows after the route is cleared. 

According to Sultan Al Jaber, head of ADNOC, even if the war ends immediately, oil flow would take at least four months to reach 80% of normal levels. Full recovery, he warned, may not come before early 2027. 

One big reason is safety. US defence officials believe clearing mines in the strait could take up to six months. No one even knows exactly how many explosives are still in the water. Until that happens, ships will remain extremely careful about entering the region.

What does ‘open Strait’ mean now? 

Another big question is what “reopening” actually means.

Iran’s Fars news agency reported that under the draft agreement, the strait would still “remain under Iran’s management.” That raises concerns that Iran could continue to have a strong influence over global oil shipping.

According to reports cited by Axios, the draft agreement suggests the strait would be open without tolls, and Iran would clear mines in return for easing sanctions and lifting port restrictions.

Iran may avoid calling it a toll, but officials have floated the idea of charging fees for tankers passing through. According to Edward Fishman, a former US State Department official now at the Council on Foreign Relations, this could turn into a huge revenue source for Iran. Speaking on the Oil Ground Up podcast with analyst Rory Johnston, he suggested that shipping payments could reach tens of billions of dollars a year, possibly even $100 billion in total. 

He also explained that even a charge of about $2 million per Very Large Crude Carrier would work out to roughly $1 per barrel. 

A higher oil price world is here to stay 

Markets now expect oil to carry a permanent “geopolitical risk premium.” That simply means oil prices will stay higher because the world now knows that supply routes can be disrupted suddenly. As Clayton Seigle from CSIS put it: “There will be a permanent price premium attached to a permanently more risky operating environment.” 

Even as negotiations to reopen the Strait of Hormuz were underway, oil prices remained elevated. Brent crude climbed to as high as $138 a barrel in April and averaged $117 for the month, showing how deeply markets remained rattled by the crisis.

Insurance costs have already changed the game. Before the crisis, war-risk insurance for oil tankers was around 0.25% of a ship’s value per trip. At the peak of the conflict, it jumped to between 3% and 8%. That means a single voyage could cost between $3 million and $8 million just in insurance.

Gulf countries are changing their strategy 

Alternative routes are building across the Gulf.

The UAE has sped up a major pipeline project that connects oil fields directly to the port of Fujairah, outside the Strait of Hormuz. This allows oil to bypass the danger zone completely. 

The new pipeline, already about 50% complete, is expected to be ready by 2027 and will double export capacity through Fujairah. 

The UAE already has another pipeline, the Abu Dhabi Crude Oil Pipeline, which helped keep exports running during the crisis. Saudi Arabia also has its own east–west pipeline system. 

Together, these projects are creating a Gulf oil network that is less dependent on one narrow waterway.

The US oil boom returns 

The crisis has also helped US oil producers. Higher prices and supply shortages have made shale oil drilling more profitable again. The US Energy Information Administration now expects US oil production to rise to 14.1 million barrels per day next year,  a major jump from earlier forecasts, according to Axios.

According to a report from Financial Times, US shale companies have already increased investment plans by nearly $500 million. The Permian Basin is leading this surge, once again becoming the centre of US oil growth.

India faces inflation, fuel pressure and economic slowdown 

India imports about 88% of its oil, and nearly half of that usually passes through the Strait of Hormuz. When the crisis hit, oil prices in India nearly doubled in a month, from $69 per barrel in February to $126 in March, and even touched $157 at one point.

As a result, the inflation is up now, transport costs have increased, and the rupee has weakened. Foreign investors also pulled out more than $20 billion from Indian markets in early 2026. 

The Reserve Bank of India warned that if the situation continued, it could be forced to act with monetary policy changes, and fuel price hikes might become unavoidable. Economic growth forecasts have also been cut, with GDP expected to slow to 6.7% in 2026–27, down from 7.7% earlier. 

India’s state-run oil companies were also under pressure because fuel prices were kept low for consumers, forcing them to absorb heavy losses. 

On top of that, gas supplies were hit when Qatar declared force majeure after damage to a key LNG facility, forcing India to find expensive alternative supplies.