A tentative framework between the U.S. and Iran on terms to end their conflict and reopen the Strait of Hormuz prompted an immediate market reaction, sending oil prices down as traders anticipated resumption of exports. Despite that market relief, energy authorities and industry analysts warn that returning output and refining operations to pre-war levels will be a drawn-out process that could take from weeks to several years depending on asset damage and operational constraints.
Immediate changes announced
U.S. President Donald Trump said the Strait of Hormuz - a critical route for global oil and gas shipments that Iran had effectively closed for months - would reopen on Friday, and that he had ordered an end to a U.S. blockade of Iranian ports. Iran’s deputy foreign minister, Kazem Gharibabadi, said a more expansive agreement on the wider conflict would be negotiated during a 60-day ceasefire period, and that sanctions relief for Iran would be part of that discussion.
How quickly crude output can return
Multiple Middle Eastern producers, including Iraq, Kuwait, Saudi Arabia and the United Arab Emirates, had halted millions of barrels per day of crude production after the effective closure of the Strait. The International Energy Agency’s most recent report estimates that more than 14 million barrels per day of output were shut, equivalent to roughly 14% of global oil demand.
An official familiar with the matter said some production - for example in Iraq - could be restarted in under a week once a restart decision is made. Other fields, however, will require substantially more time before they can return to prior levels.
Analysts at Wood Mackenzie modelled a measured, controlled ramp-up and concluded that fields affected by the Strait’s closure could reach about 70% of previous production within three months and roughly 90% within six months. They cautioned that the final approximately 1 million barrels per day will take considerably longer to restore.
Refining capacity remains a choke point
The conflict also forced refiners offline. Industry monitor IIR reported that as of May 7 up to 3.52 million barrels per day of refining capacity were shut, about 3.5% of the global total, with some plants sustaining damage. Analysts say units that were taken offline as a precaution can generally be brought back in a couple of weeks, but facilities that were damaged will take longer to repair.
Bader Nooruddin, head of research at Vitol Bahrain, said Gulf refineries could reach roughly 90% to 95% of capacity within 40 to 60 days under favorable circumstances. Rystad Energy estimated that total repair spending across the Middle East is likely to average around $46 billion, with refining and petrochemical assets taking the largest share of that expenditure because of the complexity and extent of damage.
Liquefied natural gas (LNG) faces slow restart dynamics
Major LNG facilities curtailed or stopped operations early in the conflict after attacks. The liquefaction process - which cools natural gas to around minus 162 degrees Celsius (minus 260 degrees Fahrenheit) to make it a liquid - requires a cautious cooldown step that is intentionally slow to avoid thermal stress. Once operators decide to restart, it takes roughly two weeks to produce super-chilled LNG and reach full capacity for a given train, and the production trains cannot all be brought back online at the same time; they must be sequenced.
Qatar Energy maintained three trains in operation during the conflict to serve demand from Kuwait and Bahrain, but industry participants say returning to full national capacity will take years. QatarEnergy’s CEO has said Iranian attacks eliminated 17% of Qatar’s LNG capacity for up to five years.
Global oil inventories depleted, rebuild will be protracted
The supply disruption has drained global oil stocks, and restoring inventories to typical levels will be a lengthy process. The U.S. Energy Information Administration reported that stockpiles in the world’s largest economies are headed toward their lowest levels since at least 2003, drawn down at a record pace by the lost Gulf output.
"It will take several months to fully normalise flows, and we estimate that global oil inventories have shrunk by more than 1 billion barrels since the start of the conflict," Paul Gooden, head of natural resources at investment manager Ninety One, said. One billion barrels would be worth over $83 billion at today’s prices. "Oil markets will therefore likely suffer a 'hangover' for several years as governments seek to rebuild inventories and to insulate themselves from further geopolitical shocks."
Implications at a glance
While the framework agreement calmed markets by implying a return of physical flows, the operational realities for crude fields, refineries and LNG trains mean that supply restoration will be phased and prolonged. Damaged refining and petrochemical complexes may require significant capital and time to repair. LNG capacity recovery is constrained by the thermal requirements of liquefaction trains and sequencing limitations. Meanwhile, governments and market participants face a multiyear task to rebuild strategic inventories.
Given these constraints, energy markets are likely to experience an extended period of adjustment even as the Strait reopens.