Key takeaways:
- Brent crude fell to about $83 a barrel after Trump said the Strait of Hormuz would reopen under an initial US-Iran deal expected to be signed Friday.
- Ship-tracking data reviewed by the BBC showed traffic through the strait remained low, with only two tracked vessels exiting since Sunday.
- Analysts said mine-clearing, insurance concerns, stranded tankers and damaged energy infrastructure could delay a full recovery in oil and gas flows.
Oil prices fell sharply and stocks climbed after President Donald Trump said the United States and Iran had reached an initial deal that would reopen the Strait of Hormuz, the critical shipping route that normally carries about a fifth of the world’s oil and liquefied natural gas.
The agreement, expected to be signed Friday, is aimed at ending more than three months of war involving the US, Israel and Iran. Trump said the strait would reopen to commercial shipping after the signing and that the US naval blockade on Iran would be lifted. “Let the oil flow!” he wrote on social media. Later Monday, he said “ships are starting to move,” many “loaded up with Oil,” through what he called a “totally safe, secure, and pristine” southern route.
Ship-tracking data reviewed by the BBC showed traffic remained low despite the announcement. MarineTraffic data showed only two vessels with active location trackers had exited the waterway since Sunday: a bulk carrier and a tanker. Reuters, cited by Al Jazeera, reported that a US military advisory said the blockade of Iranian ports would remain in effect until Friday’s signing and warned vessels: “Do not attempt to cross until explicit direction is given.”
Markets responded quickly to the prospect of renewed flows. Brent crude fell to about $83 a barrel after peaking near $120 to $126 during the crisis, depending on market estimates, and after trading just below $70 before hostilities began. CBS News reported Brent fell $4.22, or 4.8%, to $83.11, while West Texas Intermediate dropped $4.41, or 5.2%, to $80.47. The Guardian reported wholesale gas prices fell about 6%.
US stocks rose on hopes of relief for consumers and businesses. CBS News reported the S&P 500 climbed 111 points, or 1.5%, in early trading to 7,543, the Dow Jones Industrial Average gained 522 points, or 1%, to 51,725, and the Nasdaq composite jumped 2.2%.
Analysts cautioned that reopening the strait will not immediately restore normal trade. Hundreds of vessels have been stuck in the Gulf since the strait was closed to most shipping on Feb. 28. The International Chamber of Shipping said about 500 ships and 20,000 crew members were waiting to pass through. Lloyd’s List data cited by The Guardian showed more than 160 vessels had been stranded in the Middle East Gulf for more than 100 days.
“Even if ships now have safe passage, tankers are in the wrong place, oil production/refining facilities need to get up to full capacity, and questions over the cost and availability of insurance for ships traversing the Strait will remain,” Neil Shearing, group chief economist at Capital Economics, said.
Mine-clearing may also slow the return. Shipping and maritime security sources told Reuters that mine-sweeping operations could continue for 40 to 50 days. The Guardian reported the reopening for mine removal could take up to seven weeks during a 60-day negotiation period over the terms of Iran’s nuclear phaseout.
The political and commercial details remain unsettled. Al Jazeera reported that both sides said the initial deal would open the strait, lift the US blockade and halt fighting, while leaving Iran’s nuclear programme, sanctions, frozen assets and regional proxies for later talks. US Vice President JD Vance told CNBC he expected the strait to be “opened in a toll-free way for the long term,” while Iranian Foreign Ministry spokesman Esmaeil Baghaei indicated “fees” would be charged.
Energy costs have already fed inflation. CBS News reported May consumer prices rose at the fastest pace in more than three years, with energy accounting for more than 60% of the monthly increase. AAA put the average US gasoline price Monday at $4.07 a gallon, down from $4.53 a month earlier but still 37% higher than before the war.
Food prices could also remain under pressure. The BBC reported that about a third of traded fertiliser and large volumes of natural gas used for nitrogen-based fertiliser move through Hormuz. Maurizio Carulli of Quilter Cheviot said the ceasefire “should help ease the immediate pressure on fertiliser markets,” but added that repairs to energy infrastructure and the timing of crop seasons mean relief will not be immediate.
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