Strait of Hormuz Constraints Keep Oil Prices Elevated - Crude Oil Prices Today | OilPrice.com

Oil prices remain close to $100 per barrel despite the U.S.-Iran ceasefire, which revived hopes that the worst oil and gas supply shock ever could begin to ease soon and bring energy prices down. While immediate escalation has been taken out of the war premium, at least as of Friday morning, the reality on the ground and in the Strait of Hormuz is that the vital oil and LNG chokepoint remains largely closed and traffic controlled at Iran's discretion. The shocking and very steep rise in oil and gas prices due to the six-week war, and most of all U.S. gasoline prices, have put U.S. policymakers and President Donald Trump in a very awkward position of losing part of the MAGA crowd in an election year with midterms in November. "With the economic, political and diplomatic costs of the war rising, a negotiated ceasefire and re-opening of the Strait seems to have become more preferable to further escalation for now," energy analyst John Kemp argued in an article published hours after the ceasefire was announced. But three days after the ceasefire was announced, the reopening of the Strait of Hormuz is not happening. The ceasefire, by the way, is fragile, at best. "The ceasefire has not reopened the Strait of Hormuz, and transit remains tightly controlled," maritime intelligence firm Windward said in a Thursday note. The movement of vessels continues through routing managed by the Islamic Revolutionary Guard Corps IRGC, not standard commercial lanes. Related The Pentagon Has 268 Days to Replace America's Most Critical Supply Chain "Transit through the Strait of Hormuz remains restricted, coordinated, and selectively enforced. There has been no return to open commercial navigation. Standard shipping lanes remain largely unused, and no meaningful increase in traffic has followed the ceasefire announcement," Windward said. Therefore, the ceasefire itself is not easing the global oil and gas shock, despite the fact that its announcement pushed prices 15% down in one day to below $100 per barrel. Without a reopening of the Strait of Hormuz, the shock to the global energy system will deepen and affect the global economy, analysts say. "Recovery will depend not on declarations, but on sustained, observable change in transit behavior, enforcement, and risk conditions," Windward analysts noted. Reports have emerged that the state refiner of Taiwan and commodity trading giant Glencore have each booked a tanker to travel to the Middle East and load oil, but shippers as a whole are still very cautious amid limited information about passage available. Shipping giant Maersk has said that "Any decision to transit the Strait of Hormuz will be based on continuous risk assessments, close monitoring of the security situation, and available guidance from relevant authorities and partners." Even if the Strait of Hormuz opened today without any restrictions and risks, oil and gas supply from the Middle East faces recovery of several months well into the late summer, according to Wood Mackenzie. This, of course, is contingent on an operating Strait of Hormuz. Goldman Sachs this week warned that Brent Crude prices are set to average above $100 per barrel this year if the Strait of Hormuz remains mostly shut to tanker traffic for another month. Huge risks remain as to whether the ceasefire would hold or any agreement would be reached. "If a resolution to the war proves unachievable, we expect Brent to trade upwards again, with higher prices and demand destruction ultimately balancing the market," WoodMac's analysts said. Average Brent prices of above $90 per barrel this year would slow global economic growth and push the U.S. and EU into recession. If Brent averages $100 per barrel in 2026, global economic growth would slow to 1.7%, down from WoodMac's pre-war forecast of 2.5%. In the case of $200 oil, a global recession is inevitable, with the global economy likely to contract by 0.5%, according to WoodMac's analysis. "The ceasefire has reduced the immediate risk of further escalation, but it has not resolved the underlying supply disruptions," Ole Hansen, Head of Commodity Strategy at Saxo Bank, wrote in a Thursday note. "As long as traffic through the Strait of Hormuz remains restricted, and as long as infrastructure, storage and shipping constraints persist, the oil market is likely to remain tight - especially in the prompt segment." By Tsvetana Paraskova for Oilprice.com