Commodities
US-Iran Agreement Marks Progress But Hormuz Uncertainty Remains, Analysts Say
The interim agreement between the US and Iran marks a step forward toward peace and the possible reopening of the Strait of Hormuz, but with key details still unclear, significant uncertainty remains over when normal shipping flows can resume through the vital waterway, according to energy sector analysts.US President Donald Trump and Iran's Deputy Foreign Minister Kazem Gharibabadi on Sunday reportedly confirmed that the two countries had reached an initial agreement to end the war and to restore maritime traffic through the strait, which handles almost 20% of global oil and gas flows.According to Pakistan Prime Minister Shehbaz Sharif, Iran and US will sign a memorandum of understanding to end the war in Switzerland on Friday."For now, my personal view is that today's headlines suggest we are closer to a peace deal and a reopening of the Strait of Hormuz than at any point in the past few weeks," Muyu Xu, senior research analyst at energy intelligence provider Kpler, said in an emailed statement to."However, neither side has disclosed the details of the interim agreement, and many uncertainties remain - particularly regarding what a reopening of Hormuz would actually look like. For instance, would Iran continue to control vessel traffic? Would ships be able to use the IMO-designated routes without concerns over mine risks?," Xu added.Xu said a majority of ship-owners are likely to wait for greater clarity and assurances before considering a transit through the Hormuz Strait. The uncertainties surrounding the Hormuz Strait and the pace of return of Persian Gulf supplies to the markets could provide a floor for prices in the near term, she added.Sparta Commodities' Neil Crosby said delivering the deal will be a tough act as the two countries will be expected to negotiate contentious issues including a "comprehensive nuclear agreement" during a 60-day window following the signing of the MOU, even as Israel remains one of the several wildcards"If something is signed this week, the hard parts need to follow. Trump warned that military strikes will resume immediately if a comprehensive nuclear agreement is not finalized within the 60-day window. Iranian hardliners are already reportedly furious at Araghchi.," said Crosby, who is head of research at Sparta Commodities.Crosby said a peace announcement could result in a small pick-up in vessel traffic exiting Hormuz but expecting restoration of normal flows within a week or two was optimistic amid lack of clarity over the Hormuz toll issue and general uncertainty."The cumulative oil price sell-off means risk is asymmetric: limited extra downside if it all goes to plan (largely priced), and a snap-back in premiums on any toll dispute, signing slip or incident," he added.Singapore-based financial institution UOB said uncertainty remains over the terms of the US-Iran agreement, including Iran's nuclear program, sanctions relief and the reopening of the Strait of Hormuz, with some previous reports suggesting a phased reopening over 30 to 60 days."Our base case calls for this interim peace deal to lead to an eventual formal peace agreement between the US and Iran. This will reinforce the gradual reopening of Strait of Hormuz and resumption of critical energy flow across 2H26," Heng Koon How, UOB's head of markets strategy, said in a note.Cyril Widdershoven, senior advisor at consulting and advisory firm Blue Water Strategy, said the agreement should be viewed as a temporary political arrangement designed to halt further escalation rather than a comprehensive peace deal. While the agreement will help lower the risks of military confrontation and the probability of further attacks on critical energy infrastructure and shipping assets over the coming weeks, the situation cannot be confused with normalization, he said."Shipping companies, insurers, energy traders, and charterers are inherently risk-driven. Their decisions are based not only on political announcements or government tweets, but also on practical assessments of security conditions," Widdershoven said."It also should be understood that most shipping companies have spent months adapting their logistics networks, vessel deployment strategies, insurance arrangements, and fuel procurement systems. These changes will not disappear or be changed overnight; it will take a long period of time, if ever." he added.Echoing in, Francis Osborne, head of oil analytics at Argus Media, said commodity flows are unlikely to return to normalcy immediately even if hostilities were to end fully and the Strait of Hormuz reopened to shipping unconditionally."Firstly, vessel owners, operators and insurers will be cautious about immediately returning to the waterway, preferring to await other vessels' successful transits over a sustained period before re-committing to the route," Osborne said."Logistically, displaced vessel tonnage and crews will need to be re-positioned, which will take time to achieve, while regional commodity production and export capacity in the Middle East Gulf is likely to take months rather than weeks to be restored," he added.
