The news about a ceasefire between the United States and Iran has sparked a global rise in equities and dramatic falls in the price of oil, both internationally and domestically. The price of West Texas Intermediate, the U.S. benchmark, fell by about 15% from about $112 a barrel to prices in the low $90s. Worst-case scenarios for energy prices and their effects on both the U.S. and global economies have been avoided. Moreover, social media posts by President Donald Trump suggest that over the next 14 days, the temporary ceasefire will be replaced by some sort of extended truce between the regime in Iran and the U.S.
Still, the initial sigh of relief should not be confused with a return to normal.
Fundamental disagreements between the U.S. and Iran continue to exist. The risk of new fighting remains high. The influence of extremists within the regime has not broken. It is important to remember that since 1973, political instability in the Middle East has caused five oil price shocks. This means that the global oil market is entering a new phase of persistent tightness, high risk premiums, and a slow resumption of global oil supply.
The ceasefire does not immediately restore oil flows through the Strait of Hormuz. Shipping volumes remain constrained. Insurance costs will remain elevated. Under the most optimistic assumptions, it will take months for oil flows to reach pre-war levels. And, of course, over the coming months, oil prices will be buffeted by comments from the president and from the Iranian regime. Oil prices will reflect very elevated political risk for a long time. The market should anticipate WTI prices to remain in the $80 to $90 range through year-end. Moreover, prices for WTI are unlikely to trade below $70 for the balance of the decade.Â
The market must also be concerned about inventory depletion. During the war, countries around the world drew down strategic reserves to offset lost supply. Those barrels have to be replaced. This restocking process will provide a structural bid under oil prices well into 2027.
The Iran war has reinforced the strategic importance of supply diversification and resilience. Countries and companies will accelerate investment in regions outside the Persian Gulf, including the  U.S., Canada, South America, and parts of Africa. This shift will not immediately increase supply, but it will reshape capital investment in the energy sector. Money will flow to politically stable regions. Investment in Canada, Guyana, Suriname, Brazil, and Venezuela will be strong. Oil services companies such as SLB, Baker Hughes, and Halliburton will benefit from increased revenue opportunities.
For the U.S., this is a moment to seize market share in global oil markets. Domestic shale producers, particularly in the Permian Basin, are uniquely positioned to respond to sustained higher prices. If regulatory and permitting barriers are eased, the U.S. could buttress its position as the world’s marginal supplier, dampening volatility and stabilizing global markets. The Trump administration and Republican congressional leadership should make regulatory relief and the removal of permitting barriers a priority. It is unconscionable that oil and natural gas permitting disputes can last for years. Americans want inexpensive gasoline. The president and the Republican Party should not waste this crisis. Fight the midterm elections on the issue of lower oil and gasoline prices.
TRUMP INSISTS ON ‘NO ENRICHMENT’ OF URANIUM AFTER IRAN SAID US CEASEFIRE DEAL ACCEPTED IT
In the short term, however, consumers should not expect immediate relief. Gasoline prices will decline more slowly than crude, reflecting the lag between wholesale and retail markets and the need to rebuild inventories.
The ceasefire has ended the immediate crisis, but it has not restored the old equilibrium. Oil markets are transitioning from shock to scarcity, and that transition will define prices, policy, and geopolitics for the remainder of the decade. That means prudent investors should have exposure to U.S. energy giants such as Exxon Mobil and Chevron.
James Rogan is a former U.S. foreign service officer who later worked in law and finance for over 30 years. Now he writes a daily note on markets, economics, politics, and social issues.