Oil prices have fallen to three-month lows on expectations that a tentative agreement between the US and Israel to end the war with Iran will reopen the Strait of Hormuz.
But it could be months before U.S. consumers see significant relief at the pump.
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The closure of the strategic chokepoint has disrupted global energy markets for more than three months, cutting off a major shipping route through which about a fifth of the world’s oil and liquefied natural gas normally passes.
On Sunday, US President Donald Trump said prices would “fall like a rock” once the Strait reopened, a claim he has made numerous times in the past few weeks.
But experts warn that it is unlikely that prices will fall as quickly and significantly as Mr. Trump suggests.
Asian markets are more dependent on oil shipped through the Strait of Hormuz than North American markets, but tight supply and steady demand are driving up prices globally.
U.S. gas prices remained above $4 a gallon (3.78 liters) on Monday, with the national average at $4.06, according to the American Automobile Association (AAA). This is down from a high of $4.48 per gallon in early May.
By comparison, the price was $2.98 per gallon on February 28, when the United States and Israel first attacked Iran, causing a ripple effect in global energy markets.
U.S. energy prices have risen sharply in recent months, rising 7.7% in the past two months alone and 40% higher than a year ago, according to last week’s inflation report from the Department of Labor’s Bureau of Labor Statistics.
But prices have begun to fall, and that decline began after Washington and the Iranian government entered into negotiations.
“The potential deal reached by the US and Iran over the weekend could certainly pave the way for further price declines in the next couple of days given the results confirmed over the weekend,” Patrick de Haan, head of oil analysis at GasBadi, which tracks gasoline prices, told Al Jazeera.
But De Haan predicted a plateau, saying even if the ceasefire lasts, consumers may not see gasoline prices return to pre-war levels until 2027.
“It may take many months, if not more than a year, for global oil stocks to recover to pre-war levels,” De Haan said.
Producers will also take longer to ramp up production amid strained supply chains, while port bottlenecks and increased demand during the busy summer travel season could delay any real relief for everyday consumers.
“There are some mitigating factors that will slow the price decline,” said John Diehl, managing director of capital markets at investment bank Post Oak Group. “Many organizations and companies are having to re-build their stockpiles (such as the U.S. Strategic Petroleum Reserve) and fulfill contracts that have been on hold for the past several months.”
Supply chain tensions
Fixing kinks in supply chains will take time.
During the war, oil production slumped. More than 14 million barrels a day, or 14% of global demand, has been shut down, according to the International Energy Agency.
Deal said it will take time to restart oil production.
“My sense is that demand will continue to be high through the summer, and we probably won’t see (gasoline prices) back to pre-war levels until the end of the summer, maybe September or October,” Diehl said.
Mark Jones, a political science professor at Rice University, said producers may be reluctant to bring full operations back online until there is confirmation that the ceasefire will continue.
The agreement to lift the blockade is subject to a 60-day negotiation period between the two countries.
“Many (producers) may be reluctant to restart production until they are confident that peace will be maintained, because the last thing they want to do is make a costly effort to restart production only to end up reigniting conflict and having to shut down production again,” Jones told Al Jazeera.
Bringing production back online will also depend on the impacts faced by individual producers during the war.
Vitol Bahrain’s head of research, Bader Noordin, told Reuters that the production capacity of refineries that have been shut down as a precautionary measure could reach up to 95% within 40 to 60 days. Those damaged in battle may take longer.
But bottlenecks at ports could be the biggest hurdle, Deal said.
“There’s a lag in transportation capacity. Transportation capacity is probably the most significant constraint,” Deal said.
That’s because more than 500 ships are still waiting to pass, according to Kpler ship data.
As ships sail around the world, it takes several weeks to reach their destination, anchor, and unload at a port.
It also means waves of empty ships are waiting in ports for a place to load cargo and return to normal operations.
Major shipping companies have a holding pattern.
Norway’s Wallenius Wilhelmsen and Denmark’s Maersk both told Reuters they were making no changes to their Middle East operations following the announcement.
During the war, navigation through the Strait of Hormuz was limited, with an average of 10 ships passing through the Strait a day, compared to the usual 135, according to a Bloomberg analysis.
“Tankers take months to get to their final destination and come back again, so I think it will take until the beginning of the fall to be able to replenish stocks and get back to where we were before the conflict started, just from a transportation standpoint,” Jones said, referring to North America’s preferred months of September to November.
At the same time, U.S. strategic stockpiles are in short supply and at their lowest level since 1983. Reserve forces have declined by 18 percent since the start of the war.
“Demand could keep prices high over the summer as strategic reserves are replenished,” Diehl added.
Demand for jet fuel will also put pressure on consumers during the normally busy June-to-August U.S. travel season.
“The war had a huge impact on airlines and their ability to schedule and predict what the summer months would be like,” Diehl added.
United Airlines CEO Scott Kirby said in April that the airline’s airfares could rise by as much as 20% due to higher fuel prices.
Grocery store woes
Rising prices are also hitting food budgets.
According to the latest Consumer Price Index report, US inflation rose 4.2% compared to the same period last year. Inflationary pressures were primarily driven by fuel prices, but their impact is still felt by grocery stores.
Almost half of the world’s urea used in fertilizers is produced in the Gulf region and passes through the Strait of Hormuz. For American farmers, this means getting fertilizer for the next crop season will be more expensive.
Tomato prices, already soaring due to President Trump’s tariffs on Mexico, soared 40% last year due to rising transportation costs.
Lettuce prices rose more than 16% in May, and ground meat prices rose about 12% compared to the same period last year.
Mr Jones warned that food prices may not come down.
“Many retailers, wholesalers and producers will either keep prices where they are or reduce them only if it’s unavoidable from a sales perspective. Unlike gasoline, which tends to rise and fall in response to oil prices, the prices of many other goods that have been adversely affected by all of this are far less likely to return to their pre-conflict prices,” Jones said.
“For food, manufactured goods, and anything else that rises during a conflict, current prices often become the new baseline for future price changes.”
This can be compared to the COVID-19 pandemic period. When the pandemic disrupted supply chains, producers raised prices. A 2024 study by the Federal Trade Commission found that retail grocers kept prices high after supply chain constraints brought on by the pandemic eased.
“It appears that some in the grocery retail industry are using rising costs as an opportunity to further increase prices to increase profits,” the report said.
