Sanctions on Iran Eased, but... “At Least Four Months Until Oil Prices Normalize” [U.S.–Iran War]

International oil prices swung sharply again as the war involving the Islamic Republic of Iran, now in its second month, shows no sign of ending soon. The United States of America (U.S.) has stressed that it can redirect Iranian oil to allies such as South Korea, but it remains uncertain whether the international community can overcome what many are calling an unprecedented oil crisis.
The May contract for West Texas Intermediate crude oil (WTI) settled at $98.23 per barrel on the U.S. futures market on the 22nd (local time). In Asian trading the following day, it climbed to $101.50 per barrel, about a 3.2% increase from the U.S. close. In Europe, May Brent crude oil ended trading on the 22nd at $112.19 per barrel. That futures price rose about 2% in Asian trading before retreating back toward the European closing level.
Oil prices and the broader global economy were shaken after the Islamic Republic of Iran responded with an even tougher warning to the U.S. “48-hour ultimatum” the previous day. Fatih Birol, executive director of the International Energy Agency (IEA), said on the 22nd, “This crisis is on a scale that combines the two oil shocks of the 1970s and the natural gas supply shock triggered by Russia’s 2022 invasion of Ukraine.” He added, “This war has seriously or very seriously damaged at least 40 energy assets across nine countries in the Middle East,” and warned, “The global economy is facing a very serious threat.”
On the same day, Goldman Sachs raised its oil price outlook for the second time since the war began. The bank projected that cargo volumes through the Strait of Hormuz could remain at about 5% of normal levels for six weeks, and lifted its forecast for this year’s average prices for WTI and Brent crude oil from $72 and $77 per barrel to $79 and $85, respectively.
To boost oil supply, the U.S. temporarily lifted sanctions on Russian oil on the 12th and on Iranian oil on the 20th.
In a National Broadcasting Company (NBC) interview on the 22nd, U.S. Treasury Secretary Scott Bessent was asked whether the Islamic Republic of Iran might earn about $14 billion thanks to the sanctions relief. He replied, “Iranian oil has always been sold to China at a discounted price,” and added, “If it goes to Indonesia, if it goes to Japan, if it goes to South Korea, that improves our position.”
He emphasized that when sanctions on Russian and Iranian oil are temporarily eased, U.S. allies in Asia can purchase those barrels. Japan Broadcasting Corporation (NHK) reported on the 23rd that the Japanese government plans to spend about 800 billion yen from reserve funds in the fiscal 2025–26 budget to curb rising oil prices.
The Economist reported on the 22nd that even if the Islamic Republic of Iran were to fully reopen the Strait of Hormuz immediately, it would still take four months for oil supply in the market to return to normal. It explained that production and transport systems have been halted over the past three weeks, and time is needed to restart them. The magazine also estimated that this year’s oil output will be about 3% lower than the pre-war target.
pjw@fnnews.com Jong-won Park Reporter