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Quick US-Iran Peace Could Limit Lasting Impact on Energy Markets, Wood Mackenzie Says

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Progress in US-Iran negotiations and a reopening of the Strait of Hormuz within weeks would align with Wood Mackenzie's "Quick Peace" scenario, under which the conflict becomes only a temporary disruption to global energy markets and the economy, according to a Monday note from the firm.

Ed Crooks, vice-chair Americas, said oil supplies from the Gulf's strongest producers could be restored relatively quickly, with some countries already increasing output.

Early recovery efforts are likely to be constrained more by shipping and logistics than by upstream production capacity. However, Iraq and other countries with more complex infrastructure may take six to nine months to return close to pre-conflict production levels.

In LNG, Crooks expects global markets to remain tight until mid-2027 despite the return of Gulf exports. Damage to some LNG facilities and delays to projects under construction are expected to slow supply growth. However, the firm said an eventual global LNG surplus remains likely, though delayed until 2028, with US cargo cancellations potentially required to balance the market and contributing to sharply lower European gas prices by 2031.

Oil markets have been pricing in two potential outcomes: a reopening of Hormuz, which would ease supply concerns and lower prices, or a prolonged closure, which would drive prices significantly higher.

Strategic petroleum reserve releases and reduced consumption, particularly in Asia, helped offset supply losses, but Wood Mackenzie said those measures had limits.

The US Strategic Petroleum Reserve has been declining by roughly 8 million barrels per week and could approach its minimum mandated level within three months if withdrawals continued at that pace.

Since the conflict began three months ago, investment interest has shifted sharply toward reducing reliance on imported oil and gas, especially from the Gulf. Coal, renewables, nuclear power, and hydrocarbon resources in the Americas have all gained attention.

Yet the Gulf's core advantage remains unchanged as it is still among the world's lowest-cost sources of oil and gas. Once exports flow freely again, Gulf producers will remain highly competitive.

"While politics and conflicts can change rapidly, the fundamentals of geology and economics do not. The Gulf can be expected to remain a vital source of the world's energy supplies for decades to come," Crooks said.

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