Ships Are Moving Through the Strait of Hormuz

Israel launched new strikes in Lebanon following a deadly attack on four of its soldiers there, which prompted the follow-up talks in Switzerland to be postponed for a few days. Israel and Hezbollah agreed to a ceasefire in Lebanon on June 19, and talks resumed on June 21. On Sunday, June 21, 67 ships transited the Strait of Hormuz, following 55 ships the previous day. According to Energy Secretary Chris Wright, oil and oil products are now about equal to where they were before the conflict, as the United States has prioritized those ship movements through the strait. The U.S. military opened a channel and has been escorting ships through it for several weeks, now reaching high levels, despite Iran claiming that it had closed the strait. Iran, however, has not yet demined the central channel. Under the framework deal, Iran must allow ships to transit the Strait of Hormuz without paying tolls for 60 days.

With the signing of the peace deal on June 17, Saudi Arabia sent three super tankers through the waterway and seven vessels that had been stranded for more than 100 days–five from China, one from France, and another from Italy—began passing through the strait. On June 18, a liquefied natural gas carrier associated with Qatar’s state energy company returned to a home port and loaded up. About 12.5 million barrels crossed the Strait of Hormuz on the night of June 17.

A first round of peace talks between the United States and Iran concluded early on June 22 in Switzerland. Pakistan and Qatar, which are mediating the talks, released a statement saying that the U.S. and Iran had agreed to a “road map” to reach a final deal within 60 days. According to a U.S. official, talks focused on reopening the Strait of Hormuz and ending the fighting in Lebanon. According to U.S. Vice President JD Vance, who headed the U.S. delegation to the talks, Iran agreed to allow international nuclear inspectors back into the country, calling it a major breakthrough.

Brent oil prices had dropped below $80 a barrel—over $40 off the war peak of $126—and average U.S. gasoline prices fell below $4 a gallon. If the peace deal holds and tankers already loaded with oil pass through the Strait, Middle East oil producers will begin restarting around 11 million barrels per day of production that was shut in during the Hormuz closure, a process that could take months. Iraq said its oilfields are ready to resume production and that output will gradually return to normal, restoring previous rates.

According to Citi Bank’s base case, with a 60% probability, sustained normalization in flows will move oil markets into surplus and prices will trend lower over the next six to 12 ​months to around $60 to $65 per ⁠barrel by the first quarter of 2027.

President Trump is trying to encourage tankers to transit the Strait. Just under 500 ships, including 220 oil tankers, are parked in the Persian Gulf outside Hormuz waiting to transit. U.S. discussions have centered on ways to convince insurance companies to offer coverage to travel through the waterway. Ship owners remain wary that the peace deal may fall apart and that Iran will attack them as they attempt to transit the strait. One idea Trump administration officials have discussed with industry representatives is to offer shipowners the opportunity to pay for expedited passage through the Strait of Hormuz, possibly escorted by U.S. naval ships.

In March, the Trump administration started offering $20 billion in “political insurance” to ship owners who might attempt the Hormuz transit. The plan had few takers as owners did not want to risk physical property in waters where Iran was using missiles, drones, and small boats to inflict damage on cargoes worth millions of dollars.

If the peace holds, it is clear that it will take time for the Middle East to return to normal operations in 2026. But the International Energy Agency (IEA) expects a significant oil oversupply in 2027. The agency expects supply to surge by 8 million barrels per day, while demand increases by only 2 million barrels per day in 2027. That oversupply will bring prices down and help fill up the huge stock drawdowns created during the conflict. In 2026, the IEA forecasts oil supply to fall by 3.9 million barrels per day, as production losses in the Middle East outpace rising output ​from the Americas. IEA expects global oil demand to fall by 1.1 million barrels per day in 2026, after a 5 million barrel per day drop in April through June. That implies supply ​will be short of demand by around ⁠920,000 barrels per day in 2026, according to Reuters.

According to OPEC’s 2026 World Oil Outlook, world demand is expected to rise to 113.3 million barrels per day in 2030—a higher level than other forecasters —from 105.1 million barrels per day in 2025. For the longer term, OPEC expects world oil demand to reach 124 million barrels per day by 2050, and does not expect demand to peak. According to OPEC, the oil industry needs $17.7 trillion in investment by 2050.

Conclusion

A blip in the peace deal with Israel firing on Lebanon after four of its military members were killed there postponed the peace talks that were to start on June 19 in Switzerland between the United States and Iran until June 21. The first round of talks ended early on June 22, with a roadmap to reach a final deal in 60 days. With the signing of the framework agreement that calls for safe passage over the next 60 days while negotiations take place, oil transit through the Strait of Hormuz is recovering, particularly for oil tankers, as U.S. military ships have escorted them through the strait. Brent oil prices dropped below $80 a barrel—over $40 less than the peak price during the war, and average U.S. gas prices are below $4 a gallon. If shipments pick up and hostilities are checked, increased oil production and supply should lead to lower prices, benefiting the world’s economies, although forecasters offer differing estimates of the timing and pricing of the recovery.

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