Oil & Energy
Hormuz Reopening to Ease Logistics, Not Supply; Larger Disruption Risks Remain, Analysts Say
The reopening of the Strait of Hormuz is likely to improve logistics rather than boost supply, helping delayed oil and gas cargoes resume movement, though transit volumes have yet to show a significant increase, Vortexa analysts toldin an emailed response on Friday."In the near term, it is more likely to improve logistics than create new supply," Claire Jungman, a Vortexa analyst, told.She added that many barrels were delayed or queued rather than removed from the market, so reopening should help crude, liquefied petroleum gas, and liquefied natural gas cargoes resume movement."However, we are not seeing any significant changes in terms of transits since the announcement today [Friday]," she added.Oil flows can ease immediate supply concerns and reduce the geopolitical premium, Jungman said, adding, "For gas, it is especially important given Qatar-linked LNG flows through Hormuz."She said normalization of flows is likely to be gradual. "However, if transit still involves controlled routing or added friction, normalization may be gradual rather than immediate."On immediate challenges, Jungman said, "The main risk is that this appears more like a managed corridor than a full normalization. If vessels still need approval, designated routing, or face added costs, flows can still be delayed."She added that freight markets may also stay tight if owners and insurers remain cautious. "Backlogged vessels trying to restart together could create fresh congestion, while any renewed security incident would quickly bring risk premium back into oil and gas markets," she said.The Hormuz disruption forced refiners dependent on Middle East energy supply to implement alternative sourcing strategies, prompting them to turn to supplies from the US Gulf Coast, West Africa, and Mediterranean regions, while some importers likely relied on inventories, Jungman said."If Hormuz remains open, some of those flows could reverse back toward Middle East barrels, especially into Asia where freight economics are stronger," she said.However, if routing controls or toll-like costs remain, Jungman said, some refiners may keep inventories higher and maintain diversified sourcing until confidence fully returns.Rystad Energy said under its "Strait Open" scenario, production losses would be minimal at under 300,000 barrels per day, with total 2026 supply disruptions near 9 million barrels and Brent prices likely approaching $80 per barrel.The firm said Friday's optimistic scenario differs from its previously published base case primarily in timing, with the base case assuming a slower recovery from May, leading to a much larger 1.2 billion barrel shortfall and stronger chances of prices staying above $120 per barrel.Rystad added tanker network normalization could take 6-8 weeks, with insurers and shipowners needing 2-5 weeks to resume operations and upstream output recovering in another 2-6 weeks, largely occurring simultaneously.Phil Flynn, senior account executive at Price Futures, toldthat energy prices dropped substantially on the report that the Strait was going to be open.This is a positive step in the right direction, and we're already seeing a big drop in gasoline prices, Flynn said. "There is some concern it's going to take some time for the Strait to get back to normal and that's true, but at the same time the market has been prepared for a longer shutdown," he added.Gasoline prices are already easing from recent highs, according to Phil Flynn, who said market participants had anticipated a longer disruption to shipping through the Strait of Hormuz.He noted that while normalization of the waterway may take time, expectations of extended supply risk, along with releases from global strategic petroleum reserves, are likely to keep downward pressure on prices. However, he cautioned that markets remain sensitive and have been "whipsawed" before by headlines suggesting progress.He added that US President Donald Trump's current stance on Iran, along with reports of ongoing peace negotiations and de-escalation, is likely to reduce the risk premium on oil prices.Rystad said escalation risks still remain, warning that a six-week extension of the conflict with a full US-enforced blockade could lift supply losses to about 1.8 billion barrels, potentially triggering sharp demand destruction to prevent fuel shortages as early as June or July.Wells Fargo said the US blockade is intensifying pressure on Iran's economy, pushing both sides closer to core issues, including control of the Strait of Hormuz and Tehran's nuclear program.The firm said recent announcements, including Iran allowing full vessel transit during the ceasefire along designated routes, signal momentum but leave uncertainty around enforcement and longer-term shipping access.Wells Fargo added key uncertainties remain over whether agreements on enriched uranium and broader conditions can sustain uninterrupted flows through the strait, a critical factor for stability in global oil and gas markets.Global markets advanced Friday, with the S&P 500 rising 0.73% to 7,093.09 as optimism grew around Iran reopening the Strait of Hormuz during a ceasefire, Stifel Economics strategists said.Iran's decision to allow vessel transit through the strait during a 10-day ceasefire marked a key step toward restoring energy flows after a recent US-led naval blockade, according to Stifel.Analysts added markets are interpreting the move as progress toward a broader agreement, supporting equities and easing concerns over global oil supply disruptions.Macquarie strategists Thierry Wizman and Gareth Berry said the rally is being driven by a "peace narrative," though it relies heavily on US messaging rather than confirmed bilateral progress.They said investors are effectively relying on Trump's claims, adding that confidence in markets "requires trust in Trump alone" amid limited signals from Iran.Wizman and Berry said a reopening of Hormuz may support sentiment, but stressed that only a "nuclear concession" from Iran would signal a durable end to the conflict.Macquarie strategist Viktor Shvets said the ceasefire enabling the reopening remains fragile, with unresolved tensions in Lebanon and entrenched regional groups posing risks to stability.Shvets added Iran retains significant military and asymmetric capabilities, and is unlikely to abandon key leverage points such as its nuclear ambitions or strategic control over Hormuz.He said while risks of large-scale escalation may have eased, markets should expect continued volatility, with recurring shocks and shifting central bank responses shaping growth and inflation outlooks.