When U.S. President Donald Trump agreed to a tenuous and temporary cease-fire with Iran on Tuesday, Brent crude oil plunged below $100 a barrel, signaling a reprieve for a global economy battered by the ongoing war.
The prospect of peace negotiations may have calmed down reeling markets, but the weekslong U.S.-Iran war had not only already eaten into American wallets by pushing up gas prices, but also ramped up cost-of-living pressures in the rest of the world. And while U.S. and Iranian officials are set to meet this weekend to begin charting a way out of the war, analysts tell TIME that palpable effects on the pump—and on other commodities—might not be felt for some time.
“Even in a best-case scenario, prices are unlikely to fall sharply or immediately,” Bernard Aw, chief economist for Asia-Pacific at insurance firm Coface, says. Aw says that while a cease-fire may reduce volatility “within weeks,” a meaningful decline in oil and gas prices would take around 3-6 months.
Jamus Lim, associate professor of economics at ESSEC Business School, tells TIME that even if the ongoing cease-fire eventually leads to the reopening of the Strait of Hormuz, a key maritime route where about a fifth of the world’s global oil consumption passes through and which Iran has effectively choked since the war broke out, the war has already depleted inventories of various commodities, including oil and natural gas. While Lim said that a clear timeline may be difficult, he projected that crude oil trading prices would hover at around $100 a barrel until the end of summer.
“I don’t think we’re going to see anything, at least for the next year, at the very least,” June Goh, senior oil market analyst for Sparta Commodities, says, when asked when the price of crude oil could go back to pre-war levels around $75 a barrel.
Goh says the war has taken 10 to 11 million barrels of crude oil offline per day, and the inventory drawn down to manage the situation will need to be replenished. High demand caused by replenishing the lost oil stock will keep prices elevated, she said.
Muyu Xu, senior crude oil analyst at global trade analytics firm Kpler, added that uncertainty over whether the Strait of Hormuz will fully reopen has driven away vessels and complicated trade routes. Since the war began, Iran has selectively closed off the strait against its enemies, only allowing non-hostile vessels to pass through, and choosing to directly negotiate with specific countries instead of broadly reopening. Trump has demanded Iran reopen the strait to traffic, and had earlier threatened to wipe out Iran’s “whole civilization” without a deal.
“You need to make those ship owners convinced that it is safe,” Xu tells TIME. “Nobody really wants to take the risk.”
Even if the strait were to be opened, Aw adds “whether it functions normally again” is the pressing question. “Shipping confidence, insurance costs, and logistical bottlenecks tend to persist well after hostilities ease,” Aw explained. Trump has hinted to ABC News that the U.S. and Iran should jointly charge tolls for passing vessels.
What to expect at the pump
Because of the war, prices of gasoline—the refined product from crude oil—in the U.S. have risen to above $4 a gallon, the highest since the war between Russia and Ukraine began in 2022, and a dollar more expensive than in February, before the hostilities.
With oil prices going down, there’s an expectation that gasoline prices will track oil. But any change will also not be immediate, given the oil refinery supply chain, which could take months: crude is delivered to a refinery to produce gasoline, which is moved to a distribution center, and from there, to gas stations around the U.S.
Fuel prices, according to central bank economists, go up like “rockets” and down like “feathers,” and Aw from Coface says that even if oil prices ease immediately, consumers typically see partial relief in retail fuel prices only after a month or two. The lag, Aw says, reflects “the layered structure of pricing—existing inventories, refining margins, distribution costs, and taxes all play a role.”
Countries are also keen to prioritize their own demands first, Xu says. Many countries in the Middle East, a major global supplier of oil—particularly to Asia, have had their oil refining capacity diminished in the fallout of the war, and so it would take time for the supply of gasoline and other refined petroleum products to normalize.
A constantly evolving situation in the Middle East will also affect each vendor and each station’s fuel supplies. But should the hostilities end, consumers will “certainly be relieved that prices are not escalating further,” says ESSEC Business School’s Lim.
—Miranda Jeyaretnam contributed reporting.
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