Oil and gas supplies could take months to return to normal after Iran deal

The recently inked 'Islamabad Memorandum' signaling an end to the Iran war and the reopening of the critical Strait of Hormuz has sent a wave of relief through global energy markets, yet the world shouldn't expect an immediate return to pre-conflict stability. Despite initial drops in crude oil and natural gas prices, experts warn that it will take months, potentially extending into 2027, before energy supplies can normalize, exposing the deep-seated vulnerabilities of global supply chains. The deal, digitally signed on June 14 and slated for formal signing on June 19 in Geneva, ends military hostilities and lifts the US naval blockade on Iranian ports. While Brent crude initially tumbled to around $82 a barrel from a wartime peak of $126, and wholesale gas prices dipped 6%, both remain significantly above pre-war levels of approximately $69. The slow recovery is attributed to myriad challenges: weeks-long mine removal operations in the Strait of Hormuz, damaged infrastructure from drone strikes on facilities like Qatar's gas processing plants, and the complex, time-consuming process of restarting shut-in oil production in Iraq and Kuwait. Furthermore, crucial sanctions relief and the release of frozen Iranian assets are tied to ongoing, contentious negotiations on Iran's nuclear program, adding layers of financial and geopolitical uncertainty. As the 60-day ceasefire period commences for broader nuclear talks and the gradual unwinding of sanctions, the market will closely watch for concrete steps in Iranian oil production, which had plummeted to as low as 209,000-300,000 barrels per day (bpd) during the blockade, far below its pre-war export capacity of 2.5 million bpd. Analysts project Iran could reintroduce 500,000 to 800,000 bpd within three months, but full restoration is a 12-18 month horizon. OPEC+ will be under pressure to adjust its own quotas amidst a potential influx of Iranian crude, while lingering shipping insurance costs and risk aversion could keep prices elevated in the $80-$90 range through year-end. The durability of the peace, especially regarding unresolved issues like the Lebanon front, will dictate whether this fragile agreement translates into sustained global energy stability or simply a temporary reprieve.