The new oil order that could emerge from an Iran deal
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With a U.S.-Iran deal (maybe?) taking shape in coming days, the oil market that follows will look different than what preceded the war.
Why it matters: The emerging deal — which would re-open the Strait of Hormuz while nuclear talks proceed — could return large amounts of barrels to the market.
- It's not a moment too soon as global oil stockpiles, which have somewhat tempered the crisis, are drawn down at record pace.
Reality check: Things won't be normal for a long time, and the postwar definition of normal is fluid, too.
A few near-term and long-term things to watch...
😨 Confidence: In the near term, "It's all about whether vessel owners and crews feel safe transiting the Strait of Hormuz," said oil analyst Ben Cahill of UT-Austin.
- He notes confusion about whether Iran will imposes some kind of fees, safety, insurance rates and more.
- "It could be a stop-and-start process as risk-averse shippers work through these uncertainties," he tells me via email.
🕰️ Timelines: "Following the clearance of any mines, a minimum of two to three months will likely be required to re‑establish steady export operations," the International Energy Agency said in its mid-May oil market report.
- And Persian Gulf countries need time to resume production that declined after the main export route was cut off.
📜 Definitions: What "open" means for the world's most important energy shipping lane is unsettled.
- Iran may not call it a toll, but Iranian officials are floating new fees on tankers.
- This could be a boon to Iran even if the fee is relatively small, said Edward Fishman, a former State Department aide now with the Council on Foreign Relations.
- Fishman — speaking on oil analyst Rory Johnston's essential Oil Ground Up podcast — sees vessels paying tens of billions of dollars per year, even $100 billion.
"If you look at it from the perspective of market participants, whether it's oil traders or shippers, even if you're paying $2 million a pop for a VLCC [Very Large Crude Carrier], that's $1 a barrel, that's actually not that economically significant," he said.
- "I think that the private sector, if this is the cost of getting ships through the Strait, is going to pay the toll," he said.
⚠️ Vibes and market risk: Before the crisis that throttled supplies, there was debate in oil circles about whether markets were blasé about threats to infrastructure or shipping.
- Even once the current crisis is in the rearview, watch the level of "geopolitical risk premium" — the market's willingness to preemptively price in risk — that elevates prices.
- It could be higher now, especially with Iran's newly assertive posture in the Strait.
- "There will be a permanent price premium attached to a permanently more risky operating environment," Clayton Seigle, an oil analyst withe Center for Strategic and International Studies, said via email.
🚧 Pipeline infrastructure: There are already efforts to at least somewhat ease the Strait's importance by building pipelines to bypass it.
- The United Arab Emirates said in mid-May that it's speeding construction of a major pipeline that will double its export capacity through the port of Fujairah. CNBC has more.
🇺🇸 U.S. oil production: Higher prices are likely to encourage producers to boost their output as they see opportunities from a market that went from soft to tight.
- Before the war, the U.S. Energy Information Administration projected domestic production dipping from 13.6 million barrels per day this year to 13.3 million barrels per day in 2027.
- Its latest outlook, in mid-May, now sees production rising to 14.1 million next year.
- Publicly listed U.S. shale producers have increased 2026 capital spending plans by $490 million compared to pre-war guidance, the energy research and consulting firm Enverus tells the FT.
