So Much for the Ceasefire
July 27, 2026
Written By Tim Danze
What’s next for energy markets?
It briefly looked like we were headed for some certainty in the energy market. An interim peace agreement signed June 17 between the United States and Iran was set to ease one of the biggest supply disruptions in recent history. The agreement was to reopen the Strait of Hormuz, create a 60-day window for both countries to negotiate a lasting truce and help restore more than a billion barrels of oil to global markets.
Unfortunately, the prospects for peace between the two countries appear headed in the wrong direction. In early July, the United States and Iran traded military strikes, escalating hostilities and effectively shutting down ship traffic in the region once again.
As of late June, the Strait of Hormuz had been closed roughly 115 days. The International Energy Agency (IEA) estimates the conflict blocked up to 14 million barrels of daily crude production from world markets. Added together, we’re talking over 1.3 billion barrels of oil supply losses.
When the June peace accord was announced, some market observers thought crude supplies in the Persian Gulf would clear out relatively quickly. That optimism always seemed too rosy for me, and the renewed conflict has scuttled those hopes. The United States has reinstated its blockade of the Strait of Hormuz as Iran has resumed attacking ships.
Even in the now seemingly unlikely scenario that the hostilities could end soon, there are longer-term issues at play that will impact energy markets.
Refineries, processing plants, export terminals and fuel storage sites were heavily targeted during the conflict. Many facilities were severely damaged. Timelines to repair the damage done range from a few months up to several years. IEA has said aftereffects of the Iran crisis “will be significant and enduring.” That doesn’t sound like a quick-fix scenario.
Futures for West Texas Intermediate crude briefly traded as low as $71 per barrel in the last week of June. By mid-July they were closer to $85 per barrel. There has been some moderate relief at the fuel pump, but how long that will last is anyone’s guess.
The United States and Iran are supposedly still talking while exchanging missile strikes, but this whole situation remains highly unpredictable. The longer this drags out, the more risk will get priced into the market.
How China handles oil imports moving forward is another huge variable. According to OilPrice.com, China cut its seaborne crude oil imports dramatically during the Iran war, with overall seaborne arrivals falling to a ten-year low of approximately 6.4 million barrels per day. That was a reduction of over 40% compared to pre-war February levels of over 11 million barrels per day.
Market analysts believe China has been meeting demand by drawing on its national stockpiles, estimated at over a billion barrels in crude surplus. If those reserves begin to dwindle and China returns to the global market with purchases nearer pre-war levels, oil prices could face renewed upward pressure.
One positive note is that Saudi Arabia, Iraq and the United American Emirates have found work-arounds to help move barrels by expanding existing pipelines and exploring new land-based routes. These new oil flows could be greatly beneficial in the longer term.
As we all know, things can change quickly. We are currently near a 45-year low in supplies of the U.S. Strategic Petroleum Reserve. Not long after the June ceasefire was announced, I heard rumblings of a potential oil glut in 2027. That appears much less likely now, but it goes to show how quickly the tides can turn.
Despite the topsy-turvy nature of the market, I still expect we may see seasonal influences play a role in pricing this fall. Fuel prices typically trend lower as we approach the end of the year, creating a potential buying opportunity. If seasonal trends hold, opportunities to lock in fuel purchases may emerge later this year. Staying informed and planning ahead will put you in the best position to take advantage if prices soften.