Even if the Strait of Hormuz achieves 'unconditional opening,' the Middle East oil market cannot quickly return to normal. The combination of damaged infrastructure, disrupted transportation systems, and a lack of market confidence will extend the recovery period to at least three to six months, or even longer.
It remains unknown when the Strait of Hormuz will fully reopen, but after more than a month of destruction caused by the Iran war, the most critical factors for the global oil market are the reconstruction and repair of energy infrastructure in the Middle East and the restoration of production across the region.
Manish Raj, Managing Director of Velandera Energy Partners, stated that the world has already 'lost over 250 million barrels of oil, and the loss continues to grow daily.'
Raj noted in an interview, 'The restart process is like a stubborn mule,' and 'restoring power to the damaged energy core will be a years-long battle of destruction and reconstruction, not a DIY project that can be completed in a weekend.'
Closure of the Strait of Hormuz Triggers Historic Supply Shock
Since the outbreak of war following the US and Israeli military strikes against Iran on February 28, the Strait of Hormuz, a key waterway responsible for about a quarter of global seaborne oil trade—approximately 20 million barrels per day—has been largely closed.
The International Energy Agency (IEA) stated that this Middle East conflict has caused 'the largest supply disruption in the history of the global oil market,' with crude oil and petroleum product flows through the Strait of Hormuz dropping from about 20 million barrels per day to a mere trickle.
Meanwhile, as storage capacity rapidly fills up, Gulf nations have been forced to cut total production by at least 10 million barrels per day. Additionally, alternative routes bypassing the strait have very limited capacity.
On March 11, the IEA announced the release of a record 400 million barrels of emergency oil reserves to help offset the supply losses, but this volume represents only about four days of global oil demand.
Uncertain Restart Outlook; Recovery Could Last for Years
June Goh, Senior Oil Market Analyst at Sparta Commodities, wrote on X platform on Wednesday that restarting logistics through the Strait of Hormuz would be 'chaotic.' She emphasized the need to rebuild market confidence and stressed that 'unconditional' openness is crucial, but it will take time: 'Don’t expect too much.'
The timeline for energy market recovery formulated by the institution shows that even if the Strait of Hormuz is unconditionally reopened, it will take at least three to six months for the Middle Eastern oil market to return to normal.
June Goh stated that some refineries suffered severe damage in the attacks, and repairs could take at least a year. She also noted that Qatar's liquefaction facilities used for producing liquefied natural gas were damaged in Iran’s attacks, with recovery potentially taking three to four years.
Sparta warned that if large-scale repairs are required for infrastructure in the Gulf region—including refineries, pipelines, and terminals—the recovery period will be further extended.
Additionally, restrictions on war risk insurance may persist, leading some vessels to avoid the area. Overall, the conflict could also introduce 'security uncertainties,' delaying shipowners’ confidence in returning.
Surging oil prices and global responses heighten urgency
Adam Turnquist, Chief Technical Strategist at LPL Financial, an independent U.S. economic trader, said it would be surprising if the U.S. decided to withdraw from the region, essentially ceding control of the strait to Iran. He pointed out that a potential global risk is that Iran might develop its recent imposition of tolls on every tanker passing through the strait into a new high-revenue income stream.
Turnquist believes these factors mean the risk premium embedded in oil prices is unlikely to dissipate, making the idea of prices falling back below $70 per barrel 'almost unrealistic.'
Meanwhile, the urgency to end the war and reopen the Strait of Hormuz is growing. 'All countries are doing their utmost to mitigate domestic impacts while hoping the situation can be resolved soon—by any means necessary,' Goh said.
The rise in aviation fuel costs has prompted some airlines to increase ticket prices and cut flights; the Philippine government declared a national energy emergency on March 24; Australia, meanwhile, urged the public to conserve fuel.
In the United States, the Environmental Protection Agency has issued a temporary waiver allowing the sale of E15 gasoline (containing a higher ethanol proportion and priced lower than regular unleaded gasoline) to alleviate pressure from rising fuel prices.
The supply shock is expected to spread from east to west. Goh from Sparta noted that the Asian region has been hit particularly hard, with many import-dependent countries already experiencing fuel rationing. Bangladesh has closed universities and imposed a cap on fuel prices; Pakistan has shortened the workweek; and Thailand has asked civil servants to work from home.
Editor/Doris