-- Executives in the energy industry expect traffic via the Strait of Hormuz to gradually return to normal by late 2026, even as they warn that geopolitical disruptions are likely to persist over the medium term, Federal Reserve Bank of Dallas strategists said in a note Thursday.
Dallas Fed strategists said about 20% of respondents expect flows through the Strait to normalize by May 2026, while 39% see recovery by August.
The analysts said a further 26% anticipate normalization by November, and 14% expect it to take longer, underscoring expectations of a protracted adjustment following the recent Middle East conflict.
However, despite the projected recovery, executives remain cautious about the outlook for stability in the critical waterway.
The Fed said nearly half of the executives surveyed, 48%, said it is "very likely" that geopolitical events will disrupt traffic again within five years, while 38% described another disruption as "somewhat likely." Only 14% viewed renewed disruption as unlikely.
The study suggests that even after the conflict subsides, structural risk premia in energy transport are likely to remain elevated.
Most executives expect the cost of shipping oil from the Arabian Gulf, including insurance, freight, and tolls, to rise by $2 to $4 per barrel compared with pre-war levels, with 36% selecting that range.
On the supply side, respondents anticipate a modest boost to US production in response to the geopolitical backdrop.
For 2026, the Dallas Fed's most common expectation is an increase of between 0 and 0.25 million barrels per day. For 2027, the largest share of respondents expects a larger gain of 0.25 to 0.50 million b/d.
Executives in the Middle East also expect most of the disrupted supply to return over time, with about two-thirds saying at least 90% of shut-in production in the Arabian Gulf will eventually return to market.
Meanwhile, employment expectations were broadly stable, with 50% of executives saying staffing levels will remain unchanged between December 2025 and December 2026, while about one-third expect increases and 8% anticipate declines.
Dallas Fed said maintaining current employment levels was the most common expectation among exploration and production firms. Support service companies, in contrast, were more likely to expect slight increases in hiring.