After weeks of intense conflict, the United States and Iran reached a conditional two-week ceasefire agreement this week. Following the news, U.S. stocks rallied while energy stocks were hit by a sharp selloff. However, industry insiders have warned: declaring an end to the oil crisis because of a two-week ceasefire is like leaving the emergency room because your painkillers kicked in — the underlying injury has not healed.
The following five reasons indicate that global oil and gas markets are unlikely to “normalize” anytime soon.
Brief ceasefires have a poor track record of becoming permanent peace. They are like the interval between rounds of a boxing match — once the bell signals a return to center-ring, the punches fly furiously once again. In this particular matchup between the U.S.-Israeli coalition and Iran, any lasting peace deal must overcome a massive trust deficit.
Even if the ceasefire holds perfectly from this point forward, the physical plumbing of the global oil market does not repair itself overnight. Roughly 187 tankers, laden with 172 million barrels of seaborne crude and refined oil products, remain mired inside the Persian Gulf. Another 800 ocean-going vessels of various types are also clogging shipping channels in the Gulf. According to Daejin Lee, global head of research at Fertmax FZCO, clearing a backlog of that size would likely take more than two weeks, even under normal conditions.
Even in the best-case ceasefire scenario, Iran appears to have permanently altered its relationship to the Strait of Hormuz — the country is now a toll-taker. In recent weeks, Tehran has been charging shipping companies as much as $2 million per tanker to guarantee safe passage through the strait. This represents a major revision to the maritime chokepoint’s previous status as a toll-free route. Now that Iran has discovered this “easy money,” it is unlikely to surrender it without compensation.
The energy market seems to be viewing the Iran conflict as merely a logistical disruption. But the physical disruption is far more serious and long-lasting. War-related damage has accumulated across the entire Gulf region, from Kuwait to Qatar to the UAE, over six weeks of relentless strikes on energy infrastructure.
The final reason “normal” is not coming back soon is behavioral. Countries that were caught flat-footed by this crisis are not going to walk away without building bigger strategic reserves and diversifying their supply chains. According to Matt Gertken, U.S. Political Strategist at BCA Research, energy and commodity markets are likely to remain on a structurally higher floor regardless of the ceasefire outcome. As governments hoard and restock in anticipation of renewed conflict, that persistent demand will keep oil and gas prices elevated well above pre-war levels, even in a scenario where shipping resumes.
The Hidden Winner: U.S. Natural Gas
While oil is grabbing all the headlines, the real strategic beneficiary of this crisis is U.S. natural gas. Interestingly, U.S. natural gas prices are actually lower than they were when the war started — because its prices are set primarily by domestic supply and demand, and American gas production is currently running at record levels.
However, the global picture is the exact opposite. European gas prices have more than doubled since the war began, and Asian liquefied natural gas (LNG) benchmarks have surged. The result is a historic and growing spread between cheap domestic U.S. gas and desperate global buyers. This spread is not going away — it is the foundation of a long-term structural shift.
Conclusion
Even if the ceasefire eventually leads to a genuine peace agreement, the global oil and gas market will remain a “sick patient” for many months to come. More importantly, the demand side of the market will undergo an important structural change — countries and companies that used to be comfortable with a “just in time” approach to oil inventories will adopt a “just in case” approach: stockpiling, diversifying energy sources, and signing long-term contracts with suppliers outside the blast radius of the Middle Eastern conflict. The bull market in energy is not over.
