A temporary ceasefire in the Persian Gulf has pushed oil futures into backwardation, a state where spot prices are higher than those for future delivery, signaling that traders expect the conflict’s disruption to global supply to be short-lived. West Texas Intermediate crude traded near $98 a barrel, while the international benchmark Brent crude hovered around $96, a significant retreat from highs seen at the start of the conflict.
"The oil price correction could prove too deep, and oil prices could spike on any reports of escalation or re-emerging war rhetoric," analysts at Standard Chartered said in a note. The bank argued that prices are likely to remain $10-20 per barrel above pre-conflict levels, supported by strategic reserve purchases and logistical lags even as passage through the Strait of Hormuz tentatively reopens.
The market’s optimism contrasts with severe operational impacts already hitting major producers. ExxonMobil (NYSE: XOM) disclosed that the conflict cut its global production by 6% in the first quarter, with half of the loss originating from damage to a liquefied natural gas facility in Qatar. The company’s update is one of the first concrete measures of the war’s toll on energy infrastructure, with Qatar estimating the damaged facility could lose $20 billion in annual revenue and take five years to fully repair.
Despite a two-week ceasefire allowing passage, the Strait of Hormuz remains a critical point of uncertainty. Standard Chartered estimates 426 tankers and dozens of LNG and LPG carriers are waiting to transit the waterway. While Oman’s transport minister stated no transit fees would be imposed, reports indicate ships still require permission from the Iranian navy, leaving flows largely at Tehran’s discretion. This lingering risk continues to weigh on shipping rates and insurance costs.
The disruption has not been evenly felt across energy markets. The outlook for natural gas is less bullish, as significant growth in U.S. LNG exports is expected to counterbalance the loss of Qatari and UAE cargoes. U.S. LNG export capacity is projected to more than double by 2028, reinforcing the country’s position as the world’s top supplier and providing a crucial buffer for global gas markets. However, for crude oil, the ability of one nation to control a chokepoint for nearly a fifth of global supply remains a significant long-term risk for producers and consumers alike.
This article is for informational purposes only and does not constitute investment advice.
