Global oil markets could take as long as a year to return to something like pre-Iran war normality even if the conflict ended tomorrow, leading experts warn. Hopes for an immediate restart of shipping through the Strait of Hormuz have been dashed after Israel bombarded Lebanon shortly after the announcement of a two-week ceasefire between the US and Iran, with Iranian media reporting traffic through the strait had been halted in response.
Following the midweek news of the deal, the global benchmark oil price, Brent crude, plunged by about $US20 a barrel and towards $US90 – its biggest drop in six years – but has since climbed back above $US97 a barrel. Analysts warned that the past 48 hours have revealed how far off a negotiated end to the war remained.
Helima Croft, head of global commodity strategy at RBC Capital Markets, said Gulf countries were opposed to a formalised toll arrangement with Iran’s armed forces to allow shipping through the strait, one of the country’s initial proposals for a ceasefire deal. “Above all, we think the mechanics of reopening the strait will be exceedingly messy, with Iran potentially having a vote on nearly every barrel that exits the waterway until Gulf countries can build more alternative access routes,” Croft said.
Ahead of a 12 May budget that is expected to include additional cost-of-living support for households and businesses hurt by the fuel crisis, Jim Chalmers on Thursday recognised that “the economic consequences of the war in the Middle East will still be felt for some time yet”. “First of all, we need to see the strait [of Hormuz] reopened, we need to see the ceasefire stick,” the treasurer said, after which “we’ll need to do a proper assessment, for example, on the damage done to oil and gas infrastructure in the Middle East.”
Robert Rennie, head of commodity strategy at Westpac, agreed that the impact of the war would outlast the end of hostilities. “Even if we do manage to hold a stable ceasefire with a coordinated reopening of the strait of Hormuz, it will take months before shuttered wells are reopened, crews and vessels are in the right places, refineries are fully repaired and restocked, and fuels shipped to the countries that really need it,” Rennie said.
While fuel retailers were quick to hike prices after the first US-Israeli attacks on Iran at the end of February, lower global oil prices this week are yet to be seen at the bowser. Diesel prices have shot up 20 cents a litre in the past two days and reached new record highs of about $3.24 on Thursday, more than reversing the relief provided by the 26-cent cut in fuel excise and the temporary removal of the 10% GST.
