Strait of Hormuz may reopen on Friday, but oil prices could take 8 weeks to settle

Vijay Valecha, Wed, June 17, 2026 Gulf News

Analysts say tanker delays, insurance costs and inventories could slow price relief

Dubai: Oil prices could take 4 to 8 weeks to stabilise even if the Strait of Hormuz reopens on Friday, as tanker backlogs, elevated insurance costs, low inventories and doubts over the ceasefire continue to keep a risk premium in energy markets.

Brent crude has already dropped from wartime highs of nearly $120 a barrel to around $80, after traders priced in the expected US-Iran agreement and the reopening of one of the world’s most important oil shipping routes. That means the formal reopening may lead to only a limited further decline in crude, while the physical market takes longer to return to normal.

The bigger issue for consumers is that petrol and diesel prices usually move with a lag, because refiners, distributors and fuel retailers must work through existing inventories, procurement contracts and local pricing mechanisms before lower crude prices reach the pump.

The Strait of Hormuz carries about 20% of global oil and LNG trade, making it central to energy security and fuel costs. Reopening the route would remove a major bottleneck, but analysts expect the market to wait for proof that ships can move safely and consistently before stripping out the remaining geopolitical premium.

Vijay Valecha, Chief Investment Officer at Century Financial, expects oil prices to find an initial trading range in the first week after reopening, but sees a more stable and lower range emerging only by late third quarter if the ceasefire holds and OPEC+ gradually brings spare production capacity back to the market.

"Shipping companies are unlikely to send large numbers of tankers back until insurance costs fall and safe passage is clearly proven. Analysts believe that around 20 tankers per day need to move through the strait before the market can consider flows to be largely restored."

The physical recovery is slower because war-risk insurance for tankers has risen from about 0.125% of a ship’s value to between 2.5 and 5%, adding several million dollars to the cost of each voyage. Shipping companies are unlikely to return in large numbers until insurance costs fall and safe passage is proven through regular tanker movement.

Valecha explained that around 20 tankers a day would need to move through the strait before markets can treat flows as largely restored.

Gulf News