Will reopening Hormuz quickly reverse damage from near three-month closure?

Diplomatic progress toward reopening the Strait of Hormuz may stabilize energy markets in the short term, but analysts warn lasting damage from a near three-month closure will extend well beyond the resumption of shipping. Wood Mackenzie’s report highlights that over 11 million barrels per day of Gulf crude and condensate production remain curtailed, along with 80 million tonnes of annual LNG supply—roughly 20% of global LNG—still inaccessible to markets. The consultancy describes the Strait as the world’s most critical energy chokepoint, noting that prolonged disruptions would trigger a global supply shock with ripple effects on prices, industrial activity, and economic growth. Peter Martin, head of economics at Wood Mackenzie, emphasized that the longer the closure persists, the greater the impact on energy costs and trade flows. The report outlines three scenarios, with the most optimistic—'Quick Peace'—assuming the Strait reopens by June due to a peace agreement, allowing markets to gradually recover by late 2026. Even under this scenario, LNG markets are expected to remain tight through summer 2027 as export facilities recover and new supply growth lags. Brent crude prices are projected to ease to around $80 per barrel by the end of 2026, then drop further to $65 in 2027 as oversupply returns. However, analysts caution that the market impact may outlast the physical reopening, with buyers and governments reassessing energy security risks tied to Gulf supply routes. Ahmad Assiri, research strategist at Pepperstone, noted that oil markets are now driven more by physical supply stress than speculative futures, with crude reportedly trading between $130 and $140 per barrel amid geopolitical concerns. Higher energy costs are also feeding into logistics and transport markets, raising inflation and interest rate expectations. Assiri observed that Treasury yields, particularly for 2- and 5-year maturities, reflect growing caution about sustained price pressures from energy disruptions. Wood Mackenzie further warned that even if the Strait reopens soon, the disruption could accelerate structural shifts in global energy markets. Countries in Europe and Asia are likely to intensify efforts to reduce reliance on hydrocarbon imports, signaling lasting changes in energy security strategies.