If the ceasefire between the United States, Israel, and Iran persists, it may present the strongest opportunity for resolving the ongoing energy crisis since the Iranian Revolutionary Guards took control of the Strait of Hormuz four weeks ago amidst escalating tensions.
However, the agreement appears to be fragile. Iran stated late Wednesday that Israel’s military actions in Lebanon violate the ceasefire, while state media reported that the crucial waterway has been closed once again.
Even if the temporary truce between Washington and Tehran holds, allowing hundreds of tankers stranded in the Gulf to resume operations, experts express skepticism that this will suffice to restore the flow of oil, gas, chemicals, and other essential goods to levels seen before the crisis.
According to the United Nations, approximately 2,000 vessels, carrying around 20,000 seafarers, have been immobilized in the Gulf since the conflict’s onset. These include oil and gas tankers, bulk carriers, cargo ships, and six cruise liners.
Most of these vessels have remained anchored for nearly six weeks, facing dwindling provisions of food and water for their crews, as they cannot navigate through the strait to continue their voyages.
Following the announcement of the ceasefire, there was no immediate uptick in the number of vessels passing through the strait. In recent weeks, traffic has been minimal, typically consisting of only a handful of ships daily, compared to the pre-war average of 140.
Shipping industry experts and vessel owners have warned that even a temporary ceasefire does not guarantee safe passage, particularly since Iran’s foreign minister has indicated that transit will be overseen by Iranian military authorities.
Questions linger for shipowners and captains about the safety of navigating the strait. Iran has signaled its intention to maintain its traffic control measures, which include approving only “non-hostile vessels” — those without ties to the U.S. or Israel. This process has involved extensive information sharing regarding ownership, cargo, and prior voyages.
As part of a clearance procedure described by analysts as “relatively unsophisticated,” Iranian officials stationed on Larak Island have used binoculars to verify the names of passing vessels and grant them permission to proceed.
To facilitate visual checks, Tehran has attempted to redirect ships to a more northern corridor closer to its shores, steering clear of traditional shipping routes. However, this alternative path adds further constraints to an already congested area and could hinder the passage of large numbers of vessels.
A successful ceasefire might enable Iran and Oman to impose fees of up to $2 million (£1.5 million) per ship for passage through the strait, a move termed “Tehran’s tollbooth” by experts at Lloyd’s List. This would allow Iran to maintain control, but it remains uncertain whether all shipowners would agree to these charges.
Vessels that are fully loaded are expected to be prioritized for departure over those that are empty and unable to reload. Analysts believe that confidence will grow among operators once a ship owned by a major European firm successfully navigates the strait. However, the decision for empty vessels to enter the strait for loading at local ports remains uncertain, with no clear timeline for when this may occur.
Energy markets have reacted sharply, with hopes that millions of barrels of oil and gas trapped in the Gulf could alleviate a crisis described by the International Energy Agency as more severe than the energy crises of 1973, 1979, and 2022 combined.
The situation has been exacerbated by the forced suspension of oil and gas production across the Gulf due to storage facilities reaching capacity, along with damage sustained at key energy production sites from drone strikes.
Experts suggest it may take months or even years to fully restore energy production in the Gulf. Qatar has reported significant damage to its primary liquefied natural gas (LNG) production hub following an Iranian attack, which has reduced its capacity by 17%. Officials estimate that repairs could take between three to five years.
Wood Mackenzie, an international oil consulting firm, posits that if Qatar begins to reactivate its remaining LNG capacity next month, it would take until late August for its undamaged facilities to be operational again. However, gas analyst Tom Marzec-Manser noted that it is uncertain whether QatarEnergy would proceed with this under a ceasefire.
Refineries in the Gulf, responsible for supplying over half of Europe’s jet fuel, have also suffered damage and may take months to return to full operation.
Willie Walsh, director general of IATA, representing the airline industry, informed reporters in Singapore that even if the Strait of Hormuz remains open, it will take several months to restore supply levels due to the disruption in refining capabilities in the Middle East.
Should the ceasefire endure, albeit possibly for a limited time, oil and gas markets initially reacted positively, leading to a notable drop in global wholesale prices. However, analysts caution that prices may rise again as the global energy supply tightens in May and June.
On Wednesday morning, the international crude benchmark was just under $95 (£71) a barrel, a decrease from around $110 the previous day, while European gas prices opened nearly 20% lower at under €43 (£37) per MWh. Despite these reductions, prices remain significantly higher than pre-crisis levels, raising concerns over increased costs within the global economy, particularly for jet fuel, which has more than doubled since the onset of the Iran conflict.
