Drivers can expect to see cheaper gas prices following a newly brokered deal between U.S. and Iranian officials to end the war, but experts warn a steep drop at the pump will take time.
While many questions surround the details of the agreement, one question weighing heavily on consumers’ minds is simple: How long until gas prices return to prewar levels? According to energy analysts, the answer is complicated.
“It’s going to take time for people to feel comfortable and for insurance to be in place ... particularly to get people on the ground to restart some of these assets,” said Daniel Evans, global head of fuels and refining research at S&P Global Energy, according to ABC News.
Before the war, about 20% of the world’s oil and natural gas passed through the waterway. Its nearly four-month closure has caused the greatest oil supply shock in history, according to NPR.
Following the announcement Sunday night, Brent crude, the international standard, fell $3.45 to $83.89 a barrel. U.S. benchmark crude oil lost $4.03 to land at $80.85 a barrel. Despite the drop, prices remain well above the $70-a-barrel average seen before the conflict, according to The Associated Press.
Dozens of oil tankers loaded before the war began have been stranded, waiting for the strait to reopen. As those ships exit, new tankers can enter to load.
“Ships of the World, start your engines,” Trump said in a social media post announcing the deal on Sunday. “I hereby fully authorize the toll free opening of the Strait of Hormuz, and, simultaneously herewith, authorize the immediate removal of the United States Naval blockade.”
Despite Trump’s celebration of the new deal on social media, Iranian Deputy Foreign Minister Kazem Gharibadbadi clarified the strait would remain closed until the agreement is signed.
In a follow-up post, Trump acknowledged that the strait would reopen “upon the signing of the Deal on Friday, for purposes of mine removal.”
The official agreement has not yet been published by the White House or Iran, so the details of the deal are not widely known. However, Pakistani Prime Minister Shehbaz Sharif, the mediator between negotiations, confirmed the two sides agreed to halt military operations on all fronts, according to CNBC.
Vice President JD Vance said that the White House hopes to release the details of the agreement in the coming days, according to Reuters.
Even if the deal were to be signed by the end of the week, it will take time for operations to be up and running again.
“To bring a ship in, you need to be confident that you’ve got a big enough window of safety to bring it in, load it and move it out,” Evans added.
On top of that precaution, the tankers don’t move very fast. It takes weeks for shipments to arrive at their final destinations, according to The Associated Press.
Following the announcement, oil futures prices dropped around 4% after markets reopened following the weekend, according to NPR. In anticipation of a deal, prices dropped Thursday and Friday as well.
By Monday, prices had fallen nearly 13% from where they were before the middle of last week. Still, oil prices remain elevated compared to prewar prices, according to NPR.
Is the Strait of Hormuz really reopening?
Headlines of a potential agreement have circulated several times during the conflict, temporarily dropping oil and gas prices. However, prices have never fallen as low as they are now, and Sharif’s confirmation has helped solidify the legitimacy of the deal, according to NPR.
“Washington has an incentive to avoid a spike in gasoline prices ahead of the midterms, while Tehran is seeking sanctions relief and restored export revenues, and the global economy has a strong interest in keeping the Strait of Hormuz open,” Claudio Galimberti, the chief economist for the research firm Rystad Energy, wrote in a note, cited by NPR. “On rare occasions, these incentives align in a coherent way, and that is the strongest argument that this is more than another short-lived diplomatic cycle.”
While the reopening eases pressure on global oil supplies, it will not automatically return the market to prewar volumes or prices.
“It could be months before things return to something like the way things were before the war, at least as far as flows out of the Strait of Hormuz go,” said Kevin Book, a managing director at Clearview Energy Partners, according to NPR.
Book noted that production fields and refineries had to go offline or were damaged during the conflict. “The facilities that have been shut down, some of them can start fairly quickly. Others may take months,” he said.
Prior to the war, the world had an oversupply of oil, keeping prices lower, and Book said it is unclear whether returning to “normal” means those low prices, according to NPR.
“It’s not obvious that we’ll be in a surplus any time soon,” Book added.
Trump attends G7 Summit
Following the announcement Sunday, Trump arrived at the G7 Summit in Évian-les-Bains, France, on Monday.
The agenda for the three-day meeting with global leaders includes discussions on geopolitical challenges, peace and security for Ukraine and Europe, the situation in the Middle East and international partnerships and solidarity, according to the European Council website.