After war ends, oil prices may fall, but not instantly
Statements that crude will drop sharply when the iran war ends are directionally plausible but timing-dependent. Any decline is likely paced by how fast shipping, insurance, and operational processes normalize.
Removing a geopolitical risk premium tied to the Strait of Hormuz is separate from broader supply–demand forces. Even with de-escalation, structural fundamentals can moderate or amplify price moves over weeks and months.
Why it matters: geopolitical risk premium and Hormuz shipping
The Strait of Hormuz concentrates a significant share of Middle East crude flows, so conflict risk elevates a geopolitical risk premium. Reopening and securing the corridor can reduce that premium, though not necessarily on day one.
Political messaging has been more absolute than market mechanics. “Oil prices will plummet like rocks once the war with Iran ends,” said Donald Trump, framing a rapid postwar decline as a near certainty.
According to AP news, an IEA coordinated oil stock release totaling 400 million barrels was approved by member countries to buffer wartime disruptions and temper spikes; it was described as the agency’s largest joint action.
According to S&P Global Commodity Insights, the conflict-driven surge did not materially alter the market’s underlying trajectory. Their analysis indicates supply growth is expected to outpace demand, implying gradual, not instantaneous, downward pressure.
What changes when the war ends? Scenarios and caveats
Shipping security, insurance, and lingering logistical constraints
According to Axios, U.S. Energy Secretary Chris Wright cautioned there are no guarantees on timing, and economist Diane Swonk said a risk premium may persist after hostilities cease. Insurers, shippers, and ports typically require proof of durable security before normal terms return.
Removing the risk premium versus broader supply-demand fundamentals
Taking out a conflict premium addresses fear-based pricing; fundamentals still hinge on policy, production, and consumption patterns. That means any retreat in crude could be staggered as physical flows, contracts, and refining runs adjust.
FAQ about Strait of Hormuz
How large is the current geopolitical risk premium in crude prices?
Analysts describe a meaningful premium tied to Hormuz disruptions, but precise estimates vary and remain uncertain amid evolving security conditions.
What happens to Brent and WTI when the Strait of Hormuz fully reopens?
Prices could ease as the premium fades and shipments normalize, yet the timeline depends on security, insurance, and logistics, often unfolding over weeks, not instantly.
| DISCLAIMER: The information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing. |
Source: https://coincu.com/markets/oil-holds-as-hormuz-risk-meets-iea-stock-backstop/
