How Could the US-Iran Deal Influence Oil Prices and Food Costs?

How could the US Iran deal – Three months into a tense confrontation between the United States and Iran, a breakthrough was announced as both sides reached a tentative agreement to stabilize the region. The deal, which marks a shift from immediate conflict to a structured ceasefire, aims to restore order to the Strait of Hormuz—a critical chokepoint for global oil and LNG transportation. This development comes after months of heightened tensions that disrupted supply chains and sent energy markets into turmoil.

The Economic Fallout of the Strait Closure

The disruption of shipping through the Strait of Hormuz has already triggered significant economic consequences. With the waterway effectively closed to most vessels, global oil supplies faced a severe reduction, causing prices to spike. Prior to the crisis, approximately 20% of the world’s oil and liquefied natural gas flowed through this strategic passage. The closure forced hundreds of ships to remain stranded in the Gulf, creating uncertainty for crews and increasing the risk of incidents such as mine detonations or drone strikes.

According to data from ship-tracking platform MarineTraffic, only two vessels—consisting of a bulk carrier and a tanker—have exited the strait since Sunday, indicating that traffic remains at a fraction of its usual volume. This bottleneck has led to a surge in oil prices, with the benchmark Brent crude reaching a peak of $120 per barrel during the conflict. Before hostilities escalated, the price had hovered near $70. While the recent agreement has prompted a decline, with Brent currently trading at $83.55 per barrel, experts caution that full recovery may take weeks or even months.

Experts Weigh In on the Deal’s Stability

Neil Shearing, Capital Economics’ group chief economist, emphasized that the agreement’s success depends on whether it signals a lasting peace or a temporary truce. He noted that oil flows through the strait will not return to pre-war levels immediately, as several factors remain unresolved. “Even if ships can now transit safely, refineries and production facilities need time to ramp up operations,” Shearing explained. “Additionally, the cost of insurance for vessels navigating the strait may still fluctuate, creating lingering challenges for the market.”

Despite the agreement, some uncertainty persists. President Donald Trump, celebrating the deal on social media, claimed it would ensure “safe, secure, and pristine” passage through the strait. However, the deal’s timeline remains unclear, with Florence Schmit of Rabobank pointing out that the current framework only guarantees a 60-day period of stability. “We don’t know if the deal will hold,” she said. “What if Iran decides to reintroduce tolls or impose new restrictions after the initial term? The geopolitical situation is still volatile.”

“Some things are not confirmed on both sides—important things: we don’t know if the deal will be signed,” Schmit told the BBC. “What we’ve seen so far is a deal for 60 days for the opening of the Strait—but what happens after that?”

Analysts suggest that while the deal could lead to a short-term easing of tensions, the path to full normalization remains uncertain. If a comprehensive ceasefire is achieved, the return of 26 daily crude oil tankers through the strait may bring prices down to pre-war levels. However, market sentiment will play a crucial role in determining the outcome. “There’s a chance the price could drop below $80 a barrel,” Schmit added. “But if the geopolitical situation stabilizes, we might see the market reassess and settle around the mid-$80s by year-end.”

Industry Reactions and Operational Challenges

Major shipping companies are now focused on assessing the implications of the deal. Danish firm Maersk, the world’s second-largest shipping line, has five vessels stuck in the Gulf due to the conflict. The company stated it is still evaluating how the agreement will reshape its logistics operations, with no immediate changes to its current plans. Similarly, German carrier Hapag-Lloyd, which has four ships trapped in the strait, is hopeful about a weekend clearance once the deal is finalized and any remaining mines are removed.

These companies face not only the logistical hurdle of moving their fleets but also the challenge of rebuilding trust in the region. During the ceasefire, many operators hesitated to send ships through the strait due to the persistent threat of attacks. Now, with the deal in place, there is a renewed sense of optimism. Yet, the process of retrieving stranded vessels and restoring full capacity to the strait will require time, as well as cooperation from all involved parties.

Broader Implications for Global Markets

While the immediate focus has been on oil, the deal may also have indirect effects on food prices. A stable energy market could lower the cost of fertilizers, which are heavily reliant on oil-based production. This, in turn, might reduce expenses for agricultural producers and ultimately ease pressure on global food prices. However, the extent of this impact depends on how quickly the agreement translates into consistent supply and reduced volatility in the oil sector.

Trump’s announcement of the deal has generated mixed reactions. His social media posts, which emphasize the reopening of the strait, have been met with both support and skepticism. The president’s optimism contrasts with the cautious outlook of industry experts, who highlight the complexity of the situation. “It’s not just about the strait reopening,” said Schmit. “The market needs to see sustained movement and confidence in the agreement before prices stabilize.”

As the deal moves forward, the international community will be watching closely. The success of the agreement could signal a new era of cooperation between the US and Iran, potentially easing global economic strain. However, the path to lasting peace is fraught with challenges, and the true impact on oil and food prices will depend on how smoothly the transition unfolds. For now, the market remains in a state of cautious anticipation, with the potential for further shifts as the details of the deal solidify.

A Path to Normalcy?

With the framework deal in place, there is a glimmer of hope that the crisis will lead to long-term stability. However, the return to normal shipping levels will require more than just an agreement—it will demand consistent adherence to the terms, as well as the removal of all lingering threats. “Normality could return by the end of the year if a full ceasefire is agreed upon,” Schmit noted. “But that’s contingent on the deal being more than a temporary fix.”

The journey back to equilibrium is complex, involving not only the restoration of the strait’s functionality but also the rebuilding of economic relationships. As the situation evolves, the interplay between geopolitical stability and market dynamics will continue to shape global energy and food prices, highlighting the far-reaching consequences of Middle East tensions.