Oil and gas prices could see little to no movement in the event of an Iran ceasefire unless the Strait of Hormuz is open and proves stable, experts say, as reports of a Middle East ceasefire swirl.
“A cease-fire itself would do little or nothing to impact oil prices directly, unless it directly and clearly impacts the current de-facto shutdown status of the Strait of Hormuz,” Patrick De Haan, head of petroleum analysis at GasBuddy, told the Washington Examiner.
President Donald Trump has set an 8 p.m. deadline on Tuesday for Iran to strike a deal or release its chokehold on the vital oil shipping strait before the United States resumes its attacks on the regime’s energy infrastructure.
WHAT COULD HAPPEN WHEN TRUMP’S 48-HOUR STRAIT OF HORMUZ DEADLINE LAPSES?
Working in the background of this looming deadline is reportedly Vice President JD Vance, who has been in peace talks with Pakistani officials operating as intermediaries between the U.S. and Iranian governments, according to multiple outlets. Both sides are reportedly mulling over a proposed peace plan that could come into play as early as Monday, according to Reuters, which reported the talks.
But in the event of a ceasefire, prices at the pump might not immediately dip for U.S. drivers, oil industry experts have said, and stability in the Strait of Hormuz remains the most important factor in terms of driving down energy costs.
“If and when the Strait can fully re-open, only after confidence and verification allows ships to start transiting the Strait, will oil prices in time decline as confidence builds. It is quite early given no details exist for a timeline on fuel price impacts,” De Haan said.
The U.S. Energy Information Administration reported on March 30 that the national average price for regular gas had reached $3.990 per gallon, up over a dollar from $2.937 the week before the war in Iran began. GasBuddy pinged the national average price for regular gas at $4.08 per gallon on Monday.
“I don’t think we’re going back to the pre-war prices for the foreseeable future. Certainly won’t be this year, won’t even be next year,” Mark Zandi, chief economist at Moody’s Analytics, told Politico.
David Smith, head of marine at insurance brokerage McGill and Partners, told CBS News that insurance prices for oil shippers would decrease in the event of a ceasefire, but would remain higher than prewar rates. He predicted insurance rates could dip from at least 3.5% of the value of oil tankers to about 1%, which is higher than the typically under-1% rate during peacetime.
The cost of shipping insurance rises in times of war because of risk. Trump previously said he would offer “political risk insurance” at a low cost to shippers, but still, vessels have refused to cross the strait, and the cost of oil remains volatile.
“Hostilities could break out at any time,” Smith told the outlet.
But there is much uncertainty surrounding the long-term fallout of Iran’s chokehold on the strait.
The Trump administration has maintained that the increase in prices is temporary, with Trump calling the rise in gas prices a “short-term increase” in his address to the nation on April 1. He said that because of his administration’s “drill, baby, drill” initiative, “America has plenty of gas.”
“We’re in great shape for the future. The United States imports almost no oil through the Hormuz Strait and won’t be taking any in the future. We don’t need it. We haven’t needed it, and we don’t need it,” Trump said.
Trump called on nations that rely on oil transported through the strait to protect it themselves.
“Iran has been essentially decimated. The hard part is done, so it should be easy. And in any event, when this conflict is over, the strait will open up naturally,” Trump said. “They’re going to want to be able to sell oil, because that’s all they have to try and rebuild. It will resume the flowing and the gas prices will rapidly come back down. Stock prices will rapidly go back up.”
As Trump’s Tuesday deadline looms for the Islamic Revolutionary Guard Corps to open up the Strait of Hormuz or make a deal, the Guard issued a statement on Sunday vowing to continue to leverage power over the strait.
“The Strait of Hormuz will never return to its former state, especially for the US and Israel,” the Guard’s navy said in a statement on Sunday.
ISRAEL HITS SOUTH PARS NATURAL GAS FIELD AS TRUMP DEADLINE LOOMS
When asked how a possible ceasefire might affect gas prices in the U.S., the Energy Information Administration gave the following email statement to the Washington Examiner:
“Our Short-Term Energy Outlook is due to publish on Tuesday and any analysis we may have will be published at that time,” the agency said.