Even though a fragile ceasefire between Iran and the United States and Israel has been announced, it’s going to be a long time before prices of oil and gas come back to pre-war levels, experts say. In response to the US-Israeli attacks, Iran choked off the Strait of Hormuz, the narrow channel linking the Gulf to the Gulf of Oman, through which roughly 20 percent of the world’s oil and gas exports pass from the Middle East, mainly to Asia and also to Europe. It also attacked energy infrastructure in several Gulf countries, leading to soaring prices of not just energy but also of byproducts like helium, used in a range of products like tiles used in homes and semiconductor equipment.
Fertilisers that rely on some of these inputs were hit too, impacting sowing seasons. As a result, consumers the world over, but particularly in developing countries of Asia and Africa, have felt the brunt of those shortages and soaring prices. The question on many minds: Now that there is a ceasefire in place, how quickly will prices normalise?
Before this conflict, approximately 120-140 ships passed through the Strait of Hormuz every day. On Wednesday, only five vessels crossed the strait, while seven passed through the waterway on Thursday. That shows why “to get back to normal is going to be a while”, Weitz told Al Jazeera.
It’s hard to say when it will end, as there are so many parties who can make it not happen.” There is also some concern that developments, like Iran charging a toll fee to allow ships to pass through and skyrocketing insurance fees, will keep oil prices high. It’s about getting tankers through. Tolls won’t be the cost driver,” said Weitz.
Some of that reality was on display with the reopening of the strait, showing “signs of strain just hours after the ceasefire was announced”, said Usha Haley, W Frank Barton Distinguished Chair in international business at Wichita State University. Compounding that problem was the fact that some countries, including Iraq, had shut down production because of limited storage capacity, further taking oil supplies offline. And it’s not.” On Thursday, International Monetary Fund managing director Kristalina Georgieva warned that the fund will downgrade its forecast for the world economy next week from the current expectation of 3.3 percent.
While the war has hit most economies, “it hasn’t really affected the two primary [US] targets – Russia and China. Russia, in fact, has benefitted enormously, and Chinese ships have been allowed to go through,” said Haley. The US has hit Russia with multiple sanctions for its war on Ukraine, including capping sales of Russian oil to undercut its income stream.
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