Under the ceasefire agreement between the US and Iran, oil prices plummeted, but the energy trade through the Strait of Hormuz cannot easily be "reset to pre-war levels" by a single key.

With the ceasefire memorandum reached between the United States and Iran, oil futures market traders and stock market strategists have reacted enthusiastically and tumultuously to the temporary agreement between the United States and Iran, especially with the stock market showing a strong bullish sentiment towards future market trends. As risk appetite returns strongly, global stock markets surged on Monday in response to the agreement, and strategists unanimously believe that under the agreement, both the US and Iran will jointly reopen the Strait of Hormuz and gradually restore the flow of oil and natural gas trade from the Persian Gulf region in the Middle East. However, many Wall Street senior analysts have warned that it may still take several months for energy trade traffic in the Strait of Hormuz to fully return to pre-war levels. The major agreement reached between the US and Iran undoubtedly will alleviate major risks in the energy supply sector and the continued upward pressure on prices, but rebuilding the confidence of shipowners, insurance companies, and refiners in growth and price stability will inevitably take longer. Expectations of the opening of the Strait of Hormuz have already lowered the war premium on oil prices, but the financial market's expectation of "resumption requires months, inflation pressure eases but does not disappear" is still stirring the pricing of risky assets such as the stock market, cryptocurrencies, and others, especially the trade transportation chain, insurance chain, and investor trust chain will not be repaired synchronously with the temporary ceasefire agreement between the US and Iran. Some senior analysts also emphasize that many buyers have already adapted to this supply disruption by locking in alternative North American energy supplies and diversifying energy transport routes, and amid ongoing concerns over a potential breakdown in US-Iran peace negotiations, they remain cautious in observing energy trade through the Strait of Hormuz. This means that Middle Eastern oil and liquefied natural gas trade will not simply return to pre-war status. After the temporary agreement reached between the US and Iran to end the new round of Middle East war that began at the end of February, and possibly pave the way for the reopening of the Strait of Hormuz, the global oil prices plummeted significantly. In the early trading session in the Asian market, Brent crude futures plummeted by over 4%, to $83.90 per barrel, and WTI crude futures fell by over 4%, to $81.19 per barrel. European natural gas futures prices also plummeted significantly, with a drop of up to 5.8%. However, as Israel indicated that they would not withdraw from Lebanon, Brent crude prices continued to drop, with a decrease of over 5% at the time of publication. US-Iran ceasefire agreement full recovery of Middle East energy transport to pre-war levels! Expectations for the opening of the Strait of Hormuz are rising, but the global energy chain still needs months for repair. In terms of expectations for global monetary policy, such an agreement tends to have a dovish impact, but it is not enough to immediately open the door to interest rate cuts. The Fed and other global central banks, such as the ECB, will not turn to rate cuts based solely on the temporary ceasefire agreement reached between the two parties, as there is a lag in the transmission of energy prices from impact to core inflation, and the normalization of energy trade trends remains uncertain; prior to the agreement, a survey showed that most economists expect the Fed to keep interest rates unchanged for the rest of 2026, and this is primarily due to the persistent inflation pressure driven by the February-end Middle East war. The US-Iran ceasefire has reduced the risk of a surge in oil prices, and eased the liquidity pressure chain of "oil prices - inflation expectations - Fed rate hikes - 10-year and longer-term US bond yields", but it has not completely alleviated inflation and policy constraints. If, in the next 30-60 days, the reopening of the Strait of Hormuz proceeds smoothly, insurance costs decrease, oil tankers' empty returns increase, and refineries collectively stabilize their production capacity, oil prices may further return to fundamental pricing, giving the Fed a stronger space to "sit still" or even cut rates; on the other hand, if the US-Iran ceasefire agreement collapses under the push of factors such as continued Israeli attacks on Lebanon, Iran's reconstruction and sanctions relief, frozen funds, etc., or if supply recovery lags behind demand, oil prices may once again gain a risk premium. For financial market investors, this is a significant re-pricing across assets from war premiums to the friction of the Strait of Hormuz reopening: energy stocks, aviation shipping, inflation trading, gold, US bonds, and the AI computing industry chain leading the global bull market in stocks will all reprice around the actual speed of the reopening of the Strait of Hormuz. The recent ceasefire agreement reached between the US and Iran undoubtedly means that the war risk premium on oil prices has rapidly been squeezed out, and there is an obvious increase in short-term downward pressure on oil prices. After the two sides reached the latest ceasefire agreement, the market immediately traded on the logic of "reopening of the Strait of Hormuz, easing of supply interruptions, and reduction of energy inflation pressures", resulting in significant declines in both Brent crude and WTI crude prices. However, this is not a signal of a unilateral collapse in oil prices, as the past few months of rerouting, alternative purchases, inventory consumption, refinery adjustments, and insurance risks have already reshaped the trade chain, causing oil prices to switch from a "war blockade premium" to a "reopening friction premium". In other words, the geopolitical risk cap on the upside of oil prices has been removed, but there is still support from inventory replenishment, strategic reserve refilling, summer demand, and supply recovery slower than expected. Regarding expectations for the opening of the Strait of Hormuz, the ceasefire agreement means that the "legal and diplomatic expectations of opening" have emerged, but the "business shipping normalization" will not be completed in the short term. The Strait of Hormuz is crucial to the global energy supply system, with data from the EIA (US Energy Information Administration) showing that about 20 million barrels of oil flow through the strait daily in 2024, equivalent to 20% to 30% of global liquid oil consumption, as well as about one-fifth of global liquefied natural gas trade also passing through the channel. Therefore, as long as the Strait of Hormuz gradually reopens, the market will immediately reduce the probability of extreme supply interruptions; however, shipowners, insurance companies, refiners, and importing countries will not return to the pre-war mode immediately, and issues such as mine clearance, port congestion, insurance rates, facility repairs, alternative route contracts, and geopolitical risks of disruption will all slow down the physical flow recovery. The Strait of Hormuz may transition from "completely closed under the US-Iran dominance" to "phased resumption of trade", then enter a process of "insurance trust repair", which may be on a monthly basis rather than a daily basis. The following are popular comment summaries from senior analysts on the latest developments in the US-Iran ceasefire agreement: "The market often views the reopening of the Strait of Hormuz as flicking a switch, but in reality, it is more like a long-term process," said Haris Khurshid, Chief Investment Officer of Karobaar Capital LP, based in Chicago. "Physical flow can restart quickly. Trust sentiment usually does not." He added that the reopening of the strait and normalization of trade flows are two different things, noting that many buyers and insurers continue to be cautious, still fearing a repeat of the "boy who cried wolf" scenario by Trump, and some buyers have spent months locking in alternative routes, suppliers, and inventories, and may not immediately returning to this route after the strait is reopened. "While the geopolitical conflict may have ended, the flow of oil through the Strait of Hormuz may gradually return to normal, but the damage that has been done cannot be reversed overnight," said Priyanka Sachdeva, a senior analyst at Phillip Nova Pte Ltd. in a report. "This includes not only any actual damage to oil infrastructure in the Gulf countries but also the economic pressure faced by oil-importing economies after months of high energy costs." "Even though the market has reacted clearly to the reopening of the Strait of Hormuz, the reality at the operational level for key participants such as insurers may be more chaotic," said Charu Chanana, Chief Investment Strategist at Saxo Markets. "Mine clearance, insurance costs, port congestion, and the risk of geopolitical disruption by Israel could all slow down the speed of crude oil flow more than the headlines suggest." "It's difficult to see oil prices further plummet from here in the short term," said Tony Sycamore, a market analyst at IG Australia Pty Ltd. in a report. "Countries will take advantage of the reopening of the strait to replenish consumed inventories and refill strategic oil reserves. Furthermore, recent oil prices have already plummeted significantly due to the peace agreement expected by the market in recent days." "It's still too early to rule out further upside risks for oil prices. The negotiating process has not yet fully converted into a stable executive agreement," said Linh Tran, a market analyst at XS.com. "If demand remains strong and supply recovery is slower than expected, oil prices may still find some support." "The agreement between the US and Iran does make me feel that it is built on a somewhat fragile foundation," said Chris Weston, Director of Research at Pepperstone Group Ltd. "In terms of Iran's reconstruction, compensations from the US, frozen or confiscated funds, and various other factors, the ceasefire agreement may face multiple hurdles." "We will see many importers and energy demand countries considering additional and alternative energy logistics solutions, market suppliers, and refinery strategy adjustments," said Sara Vakhshouri, President and Founder of SVB Energy International. "We will see some long-term changes." "If the agreement between the US and Iran is completed and signed, and insurance companies are willing to insure ships, the volume of empty oil tankers passing through will increase, followed by the restart of Middle Eastern oil production, and then the restart of refineries," said Xavier Tang, Senior Market Analyst at Vortexa. "The complete recovery of production in the Middle East may take longer than markets expect because it also depends on the oil production infrastructure that has been damaged by bombings or shutdowns, and how fast they can fully ramp up again," said Selena Ling, Chief Economist at OCBC Bank.