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The first deal to end the US-Israel war on Iran has sent oil prices to a three-month low amid hopes that the Strait of Hormuz will reopen.
But it could be months before American consumers see significant relief at the gas pump.
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The shutdown of the chokepoint route disrupted energy markets around the world for more than three months, cutting off a major transmission route that carries about one-fifth of the country’s crude oil and liquefied natural gas.
On Sunday, US President Donald Trump said prices would “drop like a rock” once the road reopens, something he has said several times in the past few weeks.
However, experts warn that a major rate cut may not happen as quickly as Trump is suggesting.
Although Asian markets are more dependent on oil shipped through the Strait of Hormuz than North American markets, tight supply and stagnant demand have pushed prices up around the world.
On Monday, gasoline prices in the US remained at $4 per gallon (3.78 liters), an average of $4.06 nationwide, according to the American Automobile Association (AAA). This was the biggest drop in early May $4.48 per gallon.
By comparison, prices stood at $2.98 per gallon on February 28, when the US and Israel hit Iran for the first time, triggering energy markets around the world.
Electricity prices have it it rose sharply in the US in recent months, an increase of 7.7 percent in the last two months alone, and an increase of 40 percent from a year ago, according to an inflation report last week from the Bureau of Labor Statistics of the Labor Department,
However, prices are starting to drop, a drop that began when Washington and Tehran entered negotiations.
“The agreement that the US and Iran reached over the weekend could lead to lower prices … in the two or three days that we saw over the weekend,” Patrick De Haan, head of oil research at GasBuddy, which tracks oil prices, told Al Jazeera.
But De Haan is expecting higher ground and says consumers won’t see gas prices in the military until 2027, even if the fires end.
“It may take many months, or even more than a year, for global oil to return to pre-war levels,” De Haan said.
Amid the pressure on products, manufacturers will need time to increase output, while port bottlenecks and increased demand during the busy summer season could delay any relief for consumers on a daily basis.
“There are some mitigating factors that will slow down the decline in prices. There are many institutions and companies that have to restore their reserves (such as US oil reserves) and fulfill contracts that have been suspended for the past few months,” said John Deal, head of capital markets at investment bank Post Oak Group.
Supply chain strains
Working out the kinks in the supply chain takes time.
Oil production was greatly reduced during the war. More than 14 million barrels per day, or 14 percent of the world’s demand, have been shut down, according to the International Energy Agency.
Deal said it will take time to get oil back online.
“My guess is that there’s going to be a lot of demand in the summer, and we probably won’t go back to pre-war (oil prices) until after the summer, maybe September or October,” Deal said.
Mark Jones, a professor of political science at Rice University, said developers may be hesitant to bring all services back online until they see a fire stop.
The agreement to open the blockade is for a 60-day negotiation period between the two countries.
“A lot of (producers) don’t want to restart production until they’re sure there’s peace, because the last thing they want to do is make an expensive effort to restart production only to see the conflict revive and then shut down,” Jones told Al Jazeera.
The recovery of online manufacturing also depends on how manufacturers deal with this entire battle.
Refineries that were shut down as a precautionary measure could reach 95 percent capacity within 40-60 days, Vitol Bahrain’s head of research, Bader Nooruddin, told Reuters. Those who are damaged in the war may take a long time.
But bottlenecks at the ports could be a bigger problem, according to Deal.
“There are delays with the volume of shipments. The volume of shipments is probably the biggest problem,” Deal said.
This is because there are more than 500 ships still waiting to go, according to dispatches from Kpler.
Since the ships go all over the world, it can take several weeks for them to reach their destination, dock, and unload at the ports.
This also means that many empty ships are waiting for the facilities at the ports to load cargo and return to normal operations.
The shipping giants are in a holding pattern.
Norway’s Wallenius Wilhelmsen and Denmark’s Maersk both told Reuters they had not changed their operations in the Middle East after the announcement.
During the war, there were fewer routes through the Strait of Hormuz, with about 10 ships a day passing through, compared to the 135 that normally pass through the waterway, according to Bloomberg research.
“The tankers take months to get to their destination and back. So the possibility of restocking will take until, I think, early fall, just from the point of view of shipping, to get back to what it was before the conflict,” said Jones, referring to the period he likes the months of September to November in North America.
At the same time, US reserves have fallen, to the lowest levels since 1983. Reserves are down 18 percent since the war began.
“Demand may drive prices higher in the summer when stocks are filled,” Deal added.
Demand for jet fuel will also put pressure on buyers during the usually busy June-August season in the US.
“This war has had a huge impact on airlines and their ability to plan and anticipate how the summer months will go,” added Deal.
In April, United Airlines CEO Scott Kirby said airlines could jump as much as 20 percent in higher fuel prices.
Food problems
Rising prices are also hitting the food budget.
The latest consumer price report shows US inflation rising 4.2 percent compared to this time last year. Although inflation is largely driven by fuel prices, the effects have been felt in the grocery store.
Almost half of the world’s ureawhich is used in fertilizers, is produced in the Gulf region and passes through the Strait of Hormuz. For American farmers, this means that access to next-season fertilizer is expensive.
Tomato prices, which had already risen with Trump’s tariffs on Mexico, have risen 40 percent in the past year as prices have risen.
Lettuce prices were up 16 percent in May, and beef prices were up nearly 12 percent compared to this time last year.
Jones warned that food prices may not go down.
“Most retailers, wholesalers, retailers, and manufacturers will keep them where they are or reduce them if they are forced out of the retail business.” Unlike gasoline, which is very low with the price of oil, the prices of many other products that have been affected by all of this are too low to return to where they were before the conflict started,” said Jones.
“For commodities, for raw materials, for anything that has risen during the conflict, the current price is usually the new base from which prices are based in the future.”
This can be compared to the time of the COVID-19 pandemic. After the plague stopped sales, manufacturers raised prices. A 2024 study by the Federal Trade Commission found that retailers maintained higher prices after the effects of the pandemic subsided.
“Some in the food industry appear to have used the price hike as an opportunity to increase prices to increase their profits,” the report said.
