What happens when the war really ends

What happens when the war really ends

What happens when the war really – President Donald Trump asserted on Saturday that peace with Iran is imminent and the Strait of Hormuz will soon be open. Yet, skepticism lingers. Over the last three months, Trump has repeatedly hinted at an end to hostilities, only to withdraw support later. This pattern has led market participants to grow wary of his promises. As a result, traders are now focusing on concrete evidence of an agreement rather than the president’s verbal assurances.

Iran, meanwhile, has maintained its stance, demanding full control over the strait’s reopening as its primary bargaining chip. Despite being outmatched militarily in the conflict, the country has leveraged its naval capabilities to disrupt global oil flow. Speed boats, mines, and upgraded drones have created a blockade, limiting tanker access and depriving the world of roughly 20% of its oil supply. However, if the war is indeed over and the strait is about to reopen, what does that mean for oil prices and the broader economy?

The Path to Recovery

Immediate challenges will follow the strait’s reopening. The first step involves clearing the Persian Gulf of the 166 or so tankers that have been stranded since the conflict escalated. These vessels are carrying approximately 170 million barrels of oil, according to Matt Smith, a leading oil analyst at Kpler. Once freed, they will pave the way for empty tankers to re-enter the strait, load crude, and return to their destinations. This process could take up to three months, as Victoria Grabenwöger, a senior oil analyst at Kpler, noted. The slow pace of tanker movement, akin to the speed of a bicycle, compounds the delay.

Next, oil stockpiles must be reduced. During the crisis, producers had no choice but to fill warehouses to capacity, creating a surplus. Refiners, however, managed their storage more efficiently, avoiding full saturation. This pragmatism may expedite the return to normal operations, but the existing excess inventory will still slow the restoration of full production levels. The process of depleting these reserves will require careful management to prevent further market strain.

Restarting Production

Restarting oil production is a multi-step endeavor. Middle Eastern wells, particularly in Saudi Arabia and Iraq, were largely halted during the war. Reopening them involves intricate engineering and time-intensive operations. According to Kpler, over 12 million barrels per day of crude and 3 million barrels of refined products have been suspended. The challenge lies in ensuring reservoir pressure remains stable during restarts, as sudden increases could cause collapses, necessitating re-drilling and repairs.

Additionally, water and gas injected into wells during production must be rebalanced. This delicate process requires coordination across multiple companies and nations, especially given the proximity of wells in the region. Any inconsistency in pressure management could lead to operational failures, further delaying the resumption of normal oil flow.

Repairing Critical Infrastructure

Damage to key infrastructure throughout the war has left a significant backlog of repairs. Refiners, gas producers, and oil facilities in the Middle East require months—or even years—to restore full functionality. The scale of the task is daunting, with millions of barrels of oil still offline. These repairs are essential to ensuring the region can meet global demand, but progress will depend on the stability of the situation and the cooperation of involved parties.

Insurance companies have already responded to the uncertainty by hiking marine coverage prices by thousands of percentage points. If the strait remains a risk, insurers may be hesitant to offer affordable policies, adding financial pressure to shipping companies. This reluctance could deter vessels from entering the strait, even after it is officially reopened. The previous attempt to restore traffic saw ships rush to exit only to return when warned of new threats, highlighting the fragility of the situation.

“The past few months have been filled with many peace fakeouts, leading traders to keep oil prices high,” said Victoria Grabenwöger. “Until Iran demonstrates genuine commitment, the market will remain cautious.”

While the reopening of the strait represents a critical turning point, several uncertainties persist. The agreement hinges on Iran’s willingness to relinquish its grip on the waterway. Will the administration ease the blockade on Iranian oil, as part of a deal for lasting peace? Or will it continue to impose restrictions, leaving the country’s oil exports in limbo? These decisions will shape the trajectory of global energy markets.

Moreover, the success of the recovery process depends on Iran’s ability to maintain the strait’s safety. If the country continues to target ships with missiles or mines, the logistical challenges will multiply. The initial rush to clear the strait might be followed by a cautious return to normal operations, as traders and insurers demand assurances that the conflict has truly ended. Even if the strait reopens, the world will need time to adapt to the new dynamics of oil transportation and production.

In the meantime, oil prices remain elevated due to the persistent disruptions. The market’s patience is waning, and without visible progress, speculation could drive prices even higher. Analysts warn that the return to pre-war levels may take longer than anticipated, possibly extending into the next year. The combination of delayed tanker transit, reduced stockpiles, and the need for extensive repairs creates a complex recovery timeline.

As the situation unfolds, the focus will shift from political rhetoric to practical outcomes. Trump’s latest declaration, while hopeful, must be matched by Iran’s actions. If the strait remains open and the country adheres to the terms of the agreement, the world could see a gradual easing of supply constraints. However, if tensions resurge, the market may be forced to prepare for another round of volatility. The key lies in the next several weeks, where the true intentions of both sides will be tested.

The Strait of Hormuz has long been a strategic asset for Iran, and its closure has been a major factor in the energy crisis. But its reopening marks the beginning of a new phase. The journey to full recovery is fraught with challenges, from logistical bottlenecks to the need for extensive repairs. Even as the immediate threat subsides, the long-term implications for oil markets and global trade will determine whether this is truly the end of the conflict—or just the start of a more intricate chapter in the ongoing struggle for energy dominance.