The third Gulf war will scar energy markets for a long time yet

When President Donald Trump announced a two-week ceasefire in the Gulf and “the COMPLETE, IMMEDIATE, and SAFE OPENING of the Strait of Hormuz”, energy traders breathed a sigh of relief.

For almost six weeks 15 per cent of the world’s oil production and a fifth of its liquefied natural gas output have been trapped by Iran’s blockade.

Following Mr Trump’s announcement, the Brent crude price fell by 12 per cent, from $103 a barrel to $91.

The global benchmark has not been this volatile since near the start of the covid-19 pandemic, in 2020. Europe’s benchmark gas price had at one point dropped by 17 per cent.

Before Mr Trump declared the truce with Iran late on April 7, markets had been displaying growing stress.

West Texas Intermediate, an American benchmark which is usually cheaper than Brent, had been trading at a premium to it for much of the month — a sign that buyers were rushing to secure reliable supplies.

The price of barrels with the soonest delivery window, known as Dated Brent, hit a record high of $144 hours before the ceasefire was announced.

The agreement governing the truce, meanwhile, hangs by a thread. The speaker of Iran’s parliament has accused America of violating the deal already, and his regime has continued to launch missiles in the Gulf.

Just two ships have braved the crossing so far. If the deal survives, more will follow in the coming days.

The world economy urgently needs that to happen. But even if it does, it will take far longer than the ceasefire’s initial two-week timeline for energy markets to regain their poise.

Oil is still over 30 per cent more expensive than it was before the war began; gas is 40 per cent dearer.

Infrastructure has been ruined and the risk of renewed fighting — or another blockade — is sure to keep traders on edge.

Markets will bear the third Gulf war’s scars for some time, in the form of extra risk premiums on prices.

For now the priority is for trapped ships to leave the Gulf. In February an average of 130 ships passed through the strait a day; in recent weeks Iran has permitted only a handful to do so.

According to Kpler, a data provider, 187 tankers are trapped, loaded with 172 million barrels of crude and refined products — enough, for example, to fuel Britain for more than 100 days.

Some 15 LNG tankers are also stuck. Around 1.9m tonnes of fertiliser are trapped on 41 vessels, equal to 12 per cent of all the stuff shipped out of the strait in 2024. Include cargo ships and other bulk carriers and the number of vessels stranded in the Gulf rises to 715.

This backlog could, in principle, be cleared in a week. Many crews have dwindling supplies and are desperate to leave. Yet few captains will risk the journey until they are sure it is safe to do so.

When the Houthis, an Iran-backed Yemeni militia, ceased their attacks on ships in the Red Sea in October 2025 it took two months before Maersk, a big commercial liner, sent its first vessel through that waterway again; normal traffic has still not resumed.

When shipping companies do test the strait, their insurers will charge hefty premiums. So the resumption of regular traffic is likely to take weeks, and to cost much more than before the war.

What is more, the odds that ships will soon start sailing in the opposite direction to restock seem slim indeed. After all, those doing so while America and Iran are holding peace talks might well end up trapped if the negotiations founder.

Owners of the most valuable vessels, such as LNG carriers, may decide to dodge this risk altogether. “I don’t see anybody bringing ships inside the Gulf right now,” says Anne-Sophie Corbeau of Columbia University.

“I don’t think this is going to result in any additional LNG supply besides those cargoes that can get out within this two-week window.”

Uncertainty surrounds the finer details of the ceasefire, too. During the war Iran let some vessels pass through the strait for tolls of $2m each; it may want to continue charging these.

With oil near $100 a barrel some traders may be willing to absorb such costs. But at lower prices such surcharges would make the Gulf’s crude less attractive.

Johannes Rauball of Kpler points out that a $4m fee for a round trip could push smaller vessels, such as Aframax tankers (which carry 600,000-800,000 barrels), out of the market altogether. Only the biggest ships would find it worth paying the tolls.

Even after the backlog is cleared, countries with energy shortages will have to wait for relief.

After they depart from the Gulf, vessels bound for Asia will take at least three weeks to arrive. This will be cold comfort for farmers in need of fuel and for fertiliser plants running short of LNG ahead of the planting season.

Europe faces a longer wait, of four to six weeks, for shipments of diesel and jet fuel. And even if ships that would normally serve the Gulf are willing to return to restock, many are now collecting cargo from different places. They could take months to arrive.

Resuming the production of many commodities that normally pass through Hormuz will take longer still.

The Gulf has curtailed more than 10m barrels a day in crude output since the start of the war — equivalent to 10 per cent of global demand. It will take time to ramp production back up.

Repressurising wells too quickly can damage reservoirs, letting in water or gas. Doing so properly, especially at older wells, requires specialist teams. These will quickly become overstretched if lots need to resume production at once.

Getting gas flowing will be even slower. Last month Iranian strikes on Qatar hit two out of 14 production units at Ras Laffan, the world’s biggest LNG plant, destroying 17 per cent of its capacity.

The damage could take three to five years to repair. Even reviving what production it can still manage will be difficult.

LNG plants, which need to cool gas to -160C so that it can be shipped as a fluid, are fiendishly complex.

Ras Laffan’s functioning units have been shuttered: Wood Mackenzie, a consultancy, estimates they will need nearly four months to return to full capacity once they have been restarted. Ras Laffan matters for other commodities, too.

QatarEnergy, which runs the plant, makes 10 per cent of the world’s urea, the most widely used fertiliser, and around a third of its helium, which is used in chipmaking.

Elsewhere metal-makers have been dealt a blow. Al Taweelah, a smelter in Abu Dhabi, produces around half the Middle East’s aluminium (which amounts to nearly 10 per cent of global supply).

An Iranian strike has forced it to shut down and metal has solidified in the pots where it is usually smelted. Its owners reckon restarting production could take a year.

The total bill for repairing the Gulf’s hydrocarbon infrastructure is eye-watering. Including damage to Iranian facilities, Rystad, a consultancy, puts it at $25b.

The longer the war has continued, the more sites have been clobbered.

On April 8 an Iranian missile strike hit a Saudi Arabian conduit running west to the Red Sea port of Yanbu. Since the war began it has been the kingdom’s only way of exporting fuel. It is unclear whether deliveries have been disrupted.

The damage to commodity markets will cut deep. For decades wonks fretted about the closure of Hormuz as a theoretical possibility, dreaded but never really expected.

The third Gulf war showed how quickly a supposed worst case can become reality.

If the strait reopens subject to tolls, it would harm both the Gulf’s producers and their customers.

Mr Rauball expects oil to remain between $90 and $100 a barrel until the end of 2026, even if traffic through the strait normalises. And even that dismal prospect rests on a ceasefire between furious enemies.

J.D. Vance, Mr Trump’s own vice-president, has called it a “fragile truce”. Do not bet that the relief energy traders are feeling will last.