Even if a peace deal is reached in the ongoing Iran conflict, the energy crisis is expected to linger. Experts warn that reopening the vital Strait of Hormuz and repairing damaged infrastructure could take months or even years, contradicting the belief that a swift resolution will lead to lower energy prices. Oil prices remain significantly elevated, impacting global inflation and food prices due to increased costs of gasoline, diesel, and fertilizer.
Shipping firms face a cautious return to the Gulf, requiring a confidence-building period of 30 to 45 days post-peace agreement. Security measures will be essential to protect vessels from potential attacks, with many shipping companies having diversified their routes to avoid the risks associated with the region. The ongoing strikes on vessels highlight the precarious situation, making it unlikely that shipping will return to normal levels quickly.
The damage to energy infrastructure is extensive, with repair costs estimated between $25 billion and $58 billion. Facilities like Qatar’s Ras Laffan complex may take three to five years to fully restore. This prolonged disruption could lead to contractual disputes and further delays in energy supply, affecting global markets well into 2027.
As the situation unfolds, the global oil market may face a critical shortage by mid-2023, with US oil stocks depleting and China needing to resume imports. The potential for rising prices looms, which could trigger a global recession as demand destruction becomes the only viable solution to the impending supply crisis.
Source: DW News
