The Strait of Hormuz Reopens... Despite the Oil Price Drop, "A Long Road Remains Until Full Normalization"

[Financial News] With the United States and Iran reaching a ceasefire agreement, the Strait of Hormuz, which had been blocked for four months, has entered the process of reopening. As the key energy shipping lane, through which about 20% of global crude oil and Liquefied Natural Gas (LNG) cargo passes, reopens, international oil prices have plunged and global supply chains are showing signs of recovery. However, lingering logistics disruptions from the war, maritime security concerns, and Iran's continued claim to control mean full normalization is likely to take some time.

U.S. President Donald Trump said on the 14th local time that if the United States and Iran sign a memorandum of understanding on the ceasefire on the 19th, the Strait of Hormuz will be opened immediately and the U.S. maritime blockade on Iran will also be lifted. In a phone interview with The New York Times that day, he claimed the deal would ultimately guarantee "permanent toll exemptions" for the Strait of Hormuz.
As a result, hundreds of tankers and cargo ships, including 24 South Korean vessels that had been stranded inside and outside the strait during the war, are preparing to resume operations in stages. Once crude oil and LNG shipments restart, oil-producing countries in the Gulf that suffered production disruptions are also expected to gradually restore output.
In particular, Asian countries such as South Korea, Japan, and China, which rely heavily on the Middle East for crude oil and LNG imports, expect the move to ease energy supply concerns. The shipping industry is also watching for a possible reduction in the sharply higher freight and insurance costs.
The market reaction was immediate. Brent Crude Oil for August delivery fell 4% to the $83-per-barrel range in morning trading on the 15th, while WTI also dropped to around $81. European natural gas futures also fell by more than 5%.
This suggests that concerns over supply disruptions, which had weighed on the market during the war, are easing quickly. About 60 million barrels of crude oil and refined products trapped inside the strait during the blockade are expected to return to the market, and as production resumes in oil-producing countries, fears of a supply shortage are subsiding.
Gasoline prices felt by U.S. consumers are also on a downward trend. According to the American Automobile Association (AAA), the national average gasoline price stood at $4.07 per gallon. Although still above prewar levels, it has raised hopes for further declines.
Patrick De Haan, head of petroleum analysis at GasBuddy, said, "If there are no unexpected variables such as hurricanes, gasoline prices could fall below $3.75 per gallon before July 4, the U.S. Independence Day."


However, market participants say reopening the Strait of Hormuz will not immediately return conditions to what they were before the war.
First, physical supply chain normalization will take time. Even after the strait reopens, the industry expects it will take at least 60 to 90 days for the supply chain to regain balance, given port congestion, logistics bottlenecks, and vessel repositioning. The roughly three-week voyage from the Middle East to Asia is also a factor.
It will also take considerable time to repair oil fields, refineries, and LNG export terminals that were shut down during the war. Some facilities may require months or longer to recover, depending on the extent of the damage.
The biggest variable is Iran's claim to control the strait. The United States says reopening means restoring freedom of navigation, but Iran maintains that it has authority over the waterway. During the war, Iran tightened inspections and controls on ships, and in April it approved a draft of the Strait of Hormuz Sovereignty Establishment Act, which includes provisions on transit permits and tolls.
That leaves open the possibility of a clash between the U.S.-backed idea of "free navigation without tolls" and Iran's insistence on exercising its own management rights. Rodolphe Saadé, CEO of the world's third-largest shipping company, CMA CGM Group, said at a recent hearing in the French parliament, "Just because the Strait of Hormuz reopens does not mean everything goes back to the way it was," adding, "There is no guarantee that another crisis will not emerge."
In addition, if follow-up talks over the nuclear program and sanctions relief collapse or tensions flare up again, Iran could once again use the strait as leverage in negotiations.
km@fnnews.com Kim Kyung-min Reporter