Strait of Hormuz Reopened, But High Gas Prices Expected

Even with the Strait of Hormuz reopening following a two-week cease-fire with Iran, experts indicate that it could be several months before energy supplies stabilize, meaning Americans will likely see high gas prices extend into the summer.

The recent attacks on numerous energy facilities across the Middle East have caused significant damage that will take time and money to fix, with operators facing a considerable challenge to resume oil production.

As Joe Adamski from Procure Ability pointed out, “You can’t just flip a switch and reverse all oil flows from the Gulf.”

He elaborated that wells are not designed to be inactive for long stretches; hence, when operators try to restart production, they might discover more damage than expected.

There’s also the issue of managing storage tanks currently loaded with oil before transferring it to new ships. Furthermore, ship owners are expected to remain cautious about navigating the strait, especially after Iran’s navy warned that ships attempting unauthorized crossings would face destruction.

Jeff Krimmel of Krimmel Strategy Group noted that normalizing global energy supplies could take “many months,” potentially stretching into late 2026.

During the recent U.S.-Israel conflict with Iran, gas prices surged faster than crude oil prices, which Adamski attributed to a “fear response” from refiners. He cautioned that prices may not revert to what they were before the conflict any time soon.

“We certainly expect gas prices to be higher than they were a month ago,” Adamski stated. He suggested that while prices might dip to the low $3 range, a national average above $4 seems more plausible.

President Trump declared the two-week cease-fire with Iran on Tuesday evening. The announcement came just hours before a deadline, with the stipulation that Iran would face retaliatory strikes if it didn’t reopen the strait.

With this news, Wall Street reacted positively, as Brent crude oil prices fell below $95 a barrel, contributing to a gain of over 1,000 points for the Dow Jones Industrial Average.

Experts believe it may take several months for oil benchmarks to settle into the mid-to-high $70s but are skeptical about a return to pre-war prices in the low $60s.

The International Air Transport Association also indicated that even with the strait opening, it takes time to restore jet fuel supplies to normal levels.

Once the strait is fully operational, the priority will be to clear out ships currently transporting oil before resuming exports with empty vessels.

Krimmel emphasized a cautious approach, mentioning the uncertainty around whether shippers can trust the safety of their routes and cargoes. There’s also concern that the cease-fire, being only temporary, could lead to renewed conflict, making ship owners wary of getting trapped in the strait.

Moreover, there are reports suggesting Iran could charge ships up to $2 million for safe passage, complicating the movement of oil through the Persian Gulf further.

When asked about this, Trump indicated he was open to the proposal if the U.S. was involved. “We’re looking at doing it as a joint venture. This is a way to secure it, and also secure it from a number of other people,” he remarked.

The next significant step is to restart production at various refineries and facilities in Iran, the UAE, Qatar, and Kuwait, which were impacted by recent strikes, contributing to around 10% of global oil supply being offline.

Interestingly, the attack on Qatar’s Ras Laffan facility, which provides enough natural gas to meet the annual needs of both Britain and Italy combined, significantly reduced its production capacity, described by some as an “Armageddon” situation.

While the extent of the damage across the Middle East remains unclear, many countries are depleting their energy reserves from before the conflict. If the cease-fire extends beyond two weeks, that could lead to rising prices once more.