The text below is an edited version of an Insight originally published on CRU Online, dated 16 April 2026. For the full version, contact us here.
A fragile ceasefire between the US and Iran is holding, but the critical shipping artery of the Strait of Hormuz remains severely restricted. Our latest view is that this disruption to Hormuz is likely to continue until at least the end of May, keeping energy markets volatile and prices elevated. The path to a stable resolution is fraught with challenges – failure to reach an agreement to restore traffic through Hormuz would have significant implications for the global economy.
Negotiations are likely to take time
Recent negotiations have failed to produce a breakthrough, with both sides remaining far apart on fundamental issues. Key sticking points include the scope of the ceasefire, particularly concerning ongoing military operations in Lebanon, the US rejection of Iran's proposal to charge transit fees through the Strait, and Iranian resistance to any restrictions on its uranium enrichment programme.
Given these deep divisions, we expect several weeks of further negotiations will be needed before any lasting settlement can be reached. In the interim, traffic through Hormuz is expected to stay at a fraction of normal levels as Iran maintains its primary source of leverage.
Naval blockade adds a new layer of complexity
The situation is further complicated by the recent US announcement of a naval blockade on Iran, aimed at intercepting any ship travelling to or from Iranian ports. This action is intended to increase pressure on Iran, will have the side effect of tightening the global oil balance by cutting off Iran's exports, which have continued to flow primarily to China.
However, the blockade's effectiveness is uncertain. Intercepting vessels from the 'shadow fleet' is one thing, but boarding Chinese-flagged ships would risk a major diplomatic and economic incident. Furthermore, a blockade may not force a political compromise, and it will place reciprocal pressure on the US through rising domestic gasoline prices and broader inflation.
Our updated market view: An extended period of volatility
In light of these developments, we have updated our base case. We now expect the significant disruption to shipping in the Strait of Hormuz to persist through April and May. During this period, oil price benchmarks are expected to remain volatile and at high levels, with sharp movements in response to news from the negotiations.
The cost of delivered oil, especially for customers in Asia, is likely to be substantially higher than benchmark prices due to extreme market backwardation, rising tanker rates and increased insurance costs. The continued shut-in of Gulf supplies will place severe pressure on global inventories and specific product markets, most notably diesel and jet fuel.
Downside risks remain significant
The risks to this outlook are firmly on the downside. A prolonged stalemate would worsen the economic damage, with contagion spreading to other sectors like food via higher fertilizer prices. An even more alarming scenario involves a collapse of the ceasefire, leading to a cycle of re-escalation that could see both sides targeting energy infrastructure. Such a development would have a severe impact on energy prices and availability, with profound consequences for the global economy.
Navigating this period of heightened uncertainty requires a clear and data-driven view of the risks and their potential market impacts. CRU can help with our data and analysis on this topic. Reach out if you want to discuss more.
