Hopes of a possible US-Iran peace deal have triggered a sharp correction in global oil futures, but analysts warned that disruptions in physical crude supplies through the strait of hormuz could continue for several weeks even if an agreement is reached immediately.
Reports of a potential breakthrough gained momentum after Pakistan’s foreign ministry said it expected a resolution “very soon”, while Washington indicated it anticipated an Iranian response within 48 hours. The proposed framework is understood to include a moratorium on Iran’s nuclear enrichment programme, sanctions relief and a phased reopening of the hormuz over a 30-day period.
However, energy consultancy Rystad Energy said markets were underestimating the time required for actual oil flows to normalise.
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“A deal announcement would move futures further immediately, in fact even the potential of a deal is already triggering a decline in oil prices. However, the physical market does not run on political timelines,” said Paola Rodriguez-Masiu, Chief Oil Analyst at Rystad Energy.
The consultancy said even under an optimistic scenario, meaningful recovery in crude volumes would begin only in June, while processing port arrivals would lag by another four to six weeks.
The “July Story”
It estimated that restoring physical flows to 80-90% of pre-disruption levels would likely be “a July story”.
“The six-to-eight-week lag between credible access conditions and real flow normalization is not a conservative estimate, it is a structural feature of how shipping markets work. Global markets should not mistake a ceasefire headline for a supply headline,” Rodriguez-Masiu said.
The Strait of Hormuz handles nearly a fifth of global oil and gas trade, and restrictions around the route have severely disrupted tanker movement and cargo flows over the past few weeks, pushing crude prices sharply higher.
According to Crisil Intelligence, Brent crude prices surged around 16% month-on-month to about $121 per barrel in April as supply disruptions and elevated geopolitical risks tightened global markets.
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“Longer-than-expected supply disruptions are keeping the global crude oil markets tight,” said Sehul Bhatt, Director, Crisil Intelligence.
“The tightening is primarily supply-driven on account of continued restrictions around the Strait of Hormuz and the resultant delay in cargo flows,” Bhatt said, adding that emergency stock releases and crude already at sea had only partly cushioned the initial shock.
The agency revised its FY27 Brent crude assumption upward to $90-95 per barrel from $82-87 earlier, citing prolonged supply disruptions and geopolitical uncertainty.
Diplomatic Momentum
“Demand expectations have weakened, but not enough to offset supply-side pressures, keeping near-term balances tight,” Bhatt said.
Analysts said the current diplomatic momentum differs from previous failed attempts because of visible shifts in geopolitical positioning, particularly from China.
Iranian Foreign Minister Araghchi recently visited Beijing for the first time since the conflict began on February 28, while Chinese Foreign Minister Wang Yi publicly called for a “comprehensive ceasefire” and urged reopening of Hormuz “as soon as possible”.
Rystad Energy said China’s public posture was materially different from previous episodes and highlighted Beijing’s leverage over Iranian oil revenues.
The consultancy also pointed to operational signals from Washington, including President Donald Trump’s decision to pause US efforts to escort commercial vessels through Hormuz to allow negotiations to progress.
Another key development, according to Rystad, was the silence of Iran’s Islamic Revolutionary Guard Corps (IRGC), which has so far refrained from issuing strong political statements despite escalating diplomatic activity.
“It suggests the proposal is being considered at a level that warrants caution before public response,” Rodriguez-Masiu said.
Despite optimism in futures markets, analysts cautioned that vessel availability constraints, rerouting of trade flows, insurance repricing and operational bottlenecks would continue to keep oil markets volatile and supply conditions tight in the near term.
TOPICScrude oil pricesIran Israel warThis article was first uploaded on May seven, twenty twenty-six, at nine minutes past nine in the night.