Donald Trump’s foolish war will hurt the world for some time

The US and Iran have agreed to a 60-day ceasefire, allowing oil to flow again through the Strait of Hormuz. According to journalist Stephen Bartholomeusz, the US will lift its naval blockade and oil sanctions while Iran removes mines from the waterway, which handles 20% of global oil supply.

Why is the Strait of Hormuz reopening now?

The waterway is gradually reopening following a ceasefire agreement between the US and Iran. Under the terms disclosed by Bartholomeusz, the strait will remain toll-free for at least 60 days. Iran has agreed to clear mines it laid in the passage, while the US is lifting its naval blockade of Iranian ports and removing sanctions on Iranian oil sales.

The two nations intend to use this window to negotiate the future of Iran’s enriched uranium stockpile. The US is offering further sanctions relief and the unfreezing of tens of billions of dollars in offshore Iranian assets as incentives.

What happens to global oil prices and supply?

Oil prices dropped sharply once the deal became official. However, Bartholomeusz suggests a return to pre-war levels—specifically sub-$70 a barrel—is unlikely. The closure removed more than 1.3 billion barrels of oil from circulation, creating a supply gap that will take time to fill.

The International Energy Agency (IEA) coordinated the release of up to 400 million barrels from strategic reserves to mute the price shock. While OPEC stated it will boost production by 188,000 barrels a day, a supply and demand mismatch is expected to persist through the end of the year.

The cost of shipping and insurance

Shipping costs won’t simply reset. Because Iran demonstrated it can close the strait at will, insurance rates and shipping costs from the Persian Gulf are expected to remain higher than pre-war levels. If Iran imposes tolls after the 60-day ceasefire, costs will climb further.

How does this conflict change long-term energy trends?

The oil shock has accelerated a global shift away from fossil fuels. According to the IEA, oil demand is forecast to decline by 420,000 barrels a day this year. This “demand destruction” is partly permanent, as high petrol prices drove a sharp increase in electric vehicle (EV) sales.

Countries in Asia, previously dependent on Middle Eastern oil, have scrambled to diversify their supply sources. Additionally, mothballed coal plants have returned to service, and more nuclear plants are being planned to ensure energy security.

What is the impact on Middle East infrastructure?

Physical damage to the region’s energy grid will take years to repair. Bartholomeusz reports that Qatar’s Ras Laffan LNG complex, targeted by Iranian drones and missiles, could take years to become fully operational again.

Restoring flow to shut-in wells and damaged refineries is a delicate process. Because of this vulnerability, Middle East producers are now discussing the construction of new pipelines to bypass the Strait of Hormuz entirely.

How does the current deal compare to previous agreements?

The current outcome contrasts sharply with the Obama-era deal. Under the original agreement, Iran promised not to enrich uranium to weapons-grade levels in exchange for sanctions relief, a promise Bartholomeusz notes was honored until the Trump administration withdrew from the deal.

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