Analysis: end of the war would not generate an immediate resolution of the energy crisis

As momentum appears to be growing toward a peace agreement between the U.S. and Iran, so too are hopes that the significant economic impacts of the conflict will be mitigated.

There is much uncertainty about the exact status of negotiations and the specific terms of any agreement, including around the Strait of Hormuz, the vital shipping lane for much of the world's oil supply.

But if this is really, truly the end of the war and the strait is about to reopen, what happens next? When will prices return to what they were before the war?

Not anytime soon.

First, a logistical nightmare: Once the strait is actually reopened, a complex, multi-step process will have to unfold, including clearing the strait's existing bottlenecks, drawing down reserves, restarting production and carrying out repairs.

What will happen to oil and gas prices: Traders have tried several times to test a new minimum limit for crude oil, but it has not reached values below $94 per barrel since mid-March.

Brent crude oil futures settled at just over $100 per barrel on Friday, and if traders are optimistic about peace progress, they could try to test the lower limits when exchange trading resumes on Monday, 25.

JPMorgan analysts, who expect the strait to open in early June, expect oil to average $97 per barrel during the rest of the year.

Historically, Brent needs to be in the $60 range for $3 per gallon gasoline, noted Michael Green, chief strategist at Simplify Asset Management.

The futures market currently does not expect this to happen until 2032.

The longer this peace lasts, and the more evidence there is that production can resume, the lower oil prices could be.

But there are a lot of ifs.

Why is the Strait of Hormuz so important to the world economy?

Source: CNN