US and Iran Negotiate Permanent Reopening of Strait of Hormuz

The Federal government of the United States and Iran are negotiating a long-term agreement to permanently reopen the Strait of Hormuz and restore Middle Eastern oil flows. This follows a conflict that caused the largest oil supply disruption in history, cutting Gulf liquids production by 15 million barrels per day and disrupting 17% of global LNG supply. Vessel movements in the strait plummeted to 10% of pre-conflict levels.

A Memorandum of Understanding signed on June 17 promised 60 days of free passage for ships, but inventories remain low. Crude oil prices are projected to reach $80-90 per barrel in the second half of 2026 as global inventories continue to decline. Experts indicate that replenishment will take time and upward price pressure will persist through June and July.

Global markets mitigated initial price surges through increased exports from the United States and aggressive demand management in Japan and China. China buffered the economy by utilizing strategic reserves of over one billion barrels and accelerating electric vehicle adoption, which reduced consumption by roughly one million barrels per day last year. The International Energy Agency forecasts a potential global oversupply of 4.7 million barrels per day next year if Middle Eastern supplies fully recover, though China's future reserve and demand policies will determine market stability.