US and Iran Reach Framework Deal to End Hostilities
More than two months after the US and Israel initiated conflict with Iran, the White House and the Iranian regime have agreed on a framework deal aimed at establishing a longer-term cessation of hostilities.
The crisis in the Middle East caused global oil prices to surge, as the conflict effectively closed one of the world's crucial maritime routes for oil, liquefied natural gas (LNG), and other vital commodities, thereby restricting global supply chains.
However, experts caution that reopening normal shipping through the Strait of Hormuz will require time, and the economic repercussions of the conflict may persist for several months.
How Quickly Will the Strait of Hormuz Reopen?
US President Donald Trump celebrated the agreement on social media, stating,
"Let the oil flow!"
He indicated that the deal would include reopening the strait to commercial shipping.
BBC Verify has analyzed ship-tracking data, which suggests that traffic levels in the Strait of Hormuz remain low despite the announcement.
According to the ship tracking website MarineTraffic, only two vessels with active location trackers have exited the waterway since Sunday—a bulk carrier and a tanker.
The strait has been closed to most shipping traffic since 28 February, with passage limited to vessels friendly to Iran.
Approximately 200 vessels remain stranded in the Gulf, with risks from sea mines and drone strikes increasing dangers to crews and preventing safe navigation.
Neil Shearing, group chief economist for Capital Economics, commented on the situation, saying,
"It remained to be seen whether the latest deal represents a fragile truce or a durable settlement."
He further noted,
"It is likely to take some time for oil flows through the Strait to return to pre-war levels. Even if ships now have safe passage, tankers are in the wrong place, oil production and refining facilities need to ramp up to full capacity, and questions over the cost and availability of insurance for ships traversing the Strait will remain."
Even prior to the agreement, during the ongoing ceasefire, shipping companies were hesitant to move vessels out of the strait, and facilitating the departure of these vessels will be a primary focus.
Impact on Oil Prices
Typically, about 20% of the world's oil and LNG supplies transit the Strait of Hormuz. The effective halt in traffic has driven oil prices higher, which in turn has increased costs for petrol, diesel, and jet fuel.
During the conflict, Brent crude, the global oil benchmark, peaked at approximately $120 per barrel, compared to just below $70 before hostilities began.
Following the announcement of the framework deal, Brent crude prices fell to $83.55 per barrel.
President Trump stated that the Strait of Hormuz would reopen once the "deal" is signed on Friday, "for purposes of mine removal."
However, a retired US Navy rear admiral told BBC Radio 4's Today programme that it could take "weeks to months" to clear all mines.
Admiral Mark Montgomery, also a senior fellow at the Foundation for the Defence of Democracies, explained,
"Getting supplies through the strait back to normal would not be an overnight thing. I would say that's going to take a month or 45 days to kind of fully get till you're at a normal pumping balance, and vessels moving in and out smoothly."
Broader Economic Effects of the US-Iran Deal
The conflict has impacted global economies by pushing energy costs higher, which has increased inflation and pressured central banks to raise interest rates to control inflation.
In the UK, prior to the conflict, the Bank of England was widely expected to cut interest rates in 2024. However, with surging energy costs, forecasts shifted toward holding rates steady or potentially raising them later in the year.
Russ Mould, investment director at AJ Bell, observed,
"Just last week, markets were pricing in two rate hikes by early 2027. The probabilities have now shifted to just one rate hike by December and then potentially no change for at least the first half of 2027. That could mean companies having greater confidence to hire more people, consumers being more willing to spend money, and allow the property market to warm up after having gone cold for sellers in recent months."
Global food prices might also benefit if fertilizer supplies return closer to normal. Fertilizer, a by-product of oil, has seen soaring costs, which has placed pressure on farmers.
Maurizio Carulli, global energy analyst at Quilter Cheviot, stated,
"The ceasefire should help ease the immediate pressure on fertiliser markets,"
but he cautioned that the effect would not be immediate.
He added that approximately one-third of traded fertilizer and significant volumes of natural gas, used for nitrogen-based fertilizer production, transit the Strait of Hormuz, and that
"lingering damage to energy infrastructure will take time to repair."
Carulli also noted,
"What's more, the crop season has already begun in several parts of the world, so the resumption of deliveries of nitrogen and phosphate fertilisers will be too late for agricultural crops, which will negatively affect global produce."
Jet fuel, another oil by-product, traded in Northwest Europe (NWE), has already experienced a modest price decline.
NWE jet fuel prices have decreased to $1,033 per tonne, compared with $831 per tonne before the conflict and a peak of around $1,840 per tonne. The decline has been gradual but accelerated following the US-Iran announcement.
