LONDON, June 15 (Parliament Politics Magazine) – A framework agreement between the U.S. and Iran to end their war and reopen the Strait of Hormuz has sent oil prices lower as markets anticipate a return of supply flows. However, industry experts caution that restoring regional oil and gas production to pre-war levels will take months, if not years, due to significant infrastructure damage and operational bottlenecks.
The tentative deal follows a period where Iran effectively shut down the Strait of Hormuz, a critical transit route for global energy supplies. U.S. President Donald Trump confirmed the waterway would open, while Iran’s deputy foreign minister, Kazem Gharibabadi, noted that a broader agreement will be discussed during a 60-day ceasefire period.
Production Restoration Challenges
Regional producers, including Saudi Arabia, Iraq, the United Arab Emirates, and Kuwait, were forced to halt millions of barrels per day of output during the conflict. Data from the International Energy Agency indicates that roughly 14 million barrels per day, representing approximately 14% of global demand, remained offline as a direct result of the blockade.
While some facilities in Iraq may resume production within a week of a restart decision, other fields require extensive technical preparation. Analysts at Wood Mackenzie expect that, provided operators maintain a controlled ramp-up, fields impacted by the closure could reach 70% of their prior output within three months and 90% within six months.
“Assuming operators choose a measured and controlled ramp-up, our analysis suggests the fields affected by the Strait’s closure could get back to 70% of prior production within three months and to 90% within six months. The last 1 million bpd or so will take considerably longer,” analysts at Wood Mackenzie said.
Refining Bottlenecks
The conflict resulted in the closure of approximately 3.52 million barrels per day of refining capacity as of May 7, accounting for 3.5% of the global total. Some plants suffered physical damage, while others were shut as a precautionary measure.
Repairing damaged sites remains a primary obstacle to full operational capacity. Rystad Energy projects that total repair spending in the Middle East will average $46 billion, with refining and petrochemical assets requiring the largest share of capital due to the scale and complexity of the destruction. Industry monitor IIR suggests that while precautionary closures can be reversed in a few weeks, damaged sites will face significantly longer restoration timelines.
Liquefied natural gas facilities also sustained major disruptions, with operations in Qatar heavily curtailed following attacks. Once a decision to restart is finalized, processing facilities require a precise, two-week sequencing process to return to full capacity.
The liquefaction process involves cooling gas to approximately minus 162 degrees Celsius. This cooling phase must be executed slowly to avoid thermal shock to the infrastructure. Furthermore, long-term output has been impacted; the CEO of QatarEnergy stated that attacks destroyed 17% of Qatar’s LNG capacity, with repairs expected to span up to five years.
Global Inventory Depletion
The prolonged supply disruption has led to a significant depletion of global oil stocks. According to the U.S. Energy Information Administration, stockpiles in major economies have reached their lowest levels since 2003.
Paul Gooden, head of natural resources at Ninety One, estimates that global oil inventories have decreased by over 1 billion barrels since the start of the conflict. This deficit creates a lingering impact on the market, as nations are expected to prioritize the rebuilding of emergency reserves, potentially insulating themselves against future geopolitical volatility for years to come.
