Strait of Hormuz Reopening Only First Step as Global Energy Recovery
Faces Delays
Some wells can be turned on in days or weeks,
but bringing the Gulf’s energy system back to something akin to normal will take
months.
1.
Cease-fire enables partial reopening
o
Agreement between U.S. and Iran allows shipping
through the Strait of Hormuz.
o
Critical step to resume global oil and gas flows.
2.
Massive damage to energy infrastructure
o
Refineries, oil fields, and storage facilities
across at least nine countries hit.
o
Over 10% of global oil supply disrupted.
3.
Restarting supply is complex
o
Requires:
§ Safety
inspections
§ Repair/replacement
of specialised equipment
§ Recall of
workforce and ships
o
Not an immediate “switch-on” process.
4.
Short-term recovery path
o
Initial focus on exporting existing stockpiles.
o
Some wells may restart within days or weeks
if conditions stabilise.
5.
Long-term recovery timeline
o
Full restoration expected to take months to
years.
o
Severely damaged infrastructure may take years
to rebuild.
6.
Persistent high fuel prices
o
Despite falling crude prices, retail fuel prices
remain elevated.
o
Prices unlikely to return to pre-war levels soon
due to supply constraints.
7.
Challenges in restarting oil wells
o
Technical issues include:
§ Pressure
imbalance
§ Water
accumulation
§ Corrosion
from hydrogen sulfide
o
Enhanced recovery systems add further complexity.
8.
Key country example – Kuwait
o
Kuwait refinery hit by drone.
o
Partial output may resume in days; full recovery
could take 3–4 months.
9.
Critical LNG infrastructure damage
o
Ras Laffan Industrial City severely impacted.
o
About 17% capacity lost due to strikes.
o
Repairs for damaged LNG units may take years.
10.
Technical complexity of LNG restoration
·
Steps include:
o
Restarting offshore gas wells
o
Restoring utilities
o
Replenishing refrigerants
o
Re-cooling gas to liquid form (-162°C)
11.
Supply chain bottlenecks
·
Shortage of critical equipment (e.g., turbines).
·
Competing demand from global sectors like AI-driven
data centers.
12.
Uncertainty due to fragile cease-fire
·
Truce duration limited (two weeks).
·
Risk of renewed conflict remains high.
13.
Future price outlook
·
Oil prices expected to:
o
Decline from wartime peaks
o
Remain structurally higher due to geopolitical risk
Conclusion
Reopening the Strait of Hormuz is only the first
step toward restoring global energy supply, with significant
infrastructure damage, technical challenges, and geopolitical uncertainty
likely to keep energy markets tight and prices elevated in the near to medium
term.
Reopening
the Strait of Hormuz — a central aim for the United States when it agreed to a cease-fire
with Iran — would be the first step toward getting more energy flowing through the
Persian Gulf.
But
only the first step.
That
is because dozens of refineries, storage facilities, and oil and gas fields in at
least nine countries, from Iran to the United Arab Emirates and beyond, have been
targeted in strikes. All told, 10 percent or more of the world’s oil supply has
been turned off. Restarting those operations will require not only safe passage
through the Strait of Hormuz, but also inspecting pumps, replacing bespoke processing
equipment and recalling employees and ships that have scattered across the globe.
“It’s
not a case of you just flick a switch and everything’s back up again,” said Martin
Houston, a longtime oil and gas executive who now serves as board member for several
energy companies.
The
timeline for bringing the Gulf energy system back to some semblance of normal is
highly uncertain. For one thing, the war has been paused for only two weeks.
In
the cease-fire deal, which President Trump announced on Tuesday evening, Iran agreed
to allow ships to pass through the strait without being attacked. Earlier that day,
Mr. Trump said that if the waterway remained closed, “a whole civilization will
die tonight, never to be brought back again.” He has also repeatedly threatened
to strike Iranian power plants and other critical infrastructure if Iran does not
allow vessels to pass through the strait — acts that could be considered war crimes.
Attacks
on energy facilities continued in the days leading up to the cease-fire, including
on an oil refinery in Kuwait and petrochemical complexes in Iran. How much damage
has already been done to the region’s infrastructure is difficult to know because
many countries have shared little information.
Once
companies regain confidence that their ships can transit
the narrow waterway that runs between Iran and the Arabian Peninsula, the first
order of business is likely to be shipping out the oil and other fuels that countries
close to the strait stockpiled in storage tanks. Then, as long as hostilities do
not resume, some wells are likely to flow again within days or weeks, industry analysts
and Gulf oil executives say.
But
a fuller recovery will be a monthslong process, they cautioned. And even then, some
infrastructure that has sustained extensive damage is expected to take years to
repair.
For
consumers, this means that gasoline prices at the pump — which recently topped $4
a gallon, on average, in the United States — are unlikely to return to their prewar
levels any time soon, even though international oil prices fell considerably late
Tuesday. Countries are using up stores of energy they had before the war, so the
longer the war drags on, the stickier those high prices are likely to be.
The
shuttering of oil wells has other consequences. Once idled, oil and gas wells can
be difficult to restart, and the longer they remain closed, the more trouble companies
may have turning them back on.
The
pressure underground can get out of whack while wells are closed; water can build
up. If the shutdowns last a long time, equipment might corrode after being exposed
to hydrogen sulfide for too long. The toxic gas, which
smells like rotten eggs, is often found mixed in with oil and natural gas. Saudi
Arabia and Iraq inject gas or water into many of their wells to coax out more oil,
adding another layer of complexity to re-establishing the correct pressure when
the time comes to reopen, the research firm BloombergNEF
wrote recently.
Kuwait,
which is sandwiched between Saudi Arabia and Iraq at the tip of the Persian Gulf,
is the world’s 10th-largest oil producer. Before Friday, when its Mina al-Ahmadi
refinery was hit by a drone, the chief executive of the state-owned oil company
Kuwait Petroleum said he expected to be able to “bring out quite a bit of production
immediately, within a few days” of the war’s ending. Sheikh Nawaf Al Sabah, the
chief executive, added during remarks late last month at an energy conference, CERAWeek
by S&P Global, in Houston that “the full production will come within three or
four months.”
The
big question is how much damage has been sustained by all the infrastructure needed
to get oil and gas from wellheads to world markets. Analysts say few installations
appear to have suffered catastrophic harm, but they are working with limited information
about most facilities.
One
of the most important energy assets in the region is Qatar’s natural-gas export
plant, Ras Laffan. The site, which spans at least three square miles in a large
industrial city, supplies countries throughout Asia and Europe with natural gas
that people use for cooking, heating homes and generating electricity.
Before
it can be loaded on a ship, natural gas must be turned into a liquid by cooling
it at about minus 260 degrees Fahrenheit (minus 162 degrees Celsius). Qatar stopped
making this liquefied natural gas, or L.N.G., during the early days of the war.
Missiles later took out 17 percent of the site’s capacity.
The
undamaged parts of the facility would be restarted first, likely over a period of
weeks or months. Steps include reopening the offshore gas wells that feed the export
terminal; restarting any utilities that had been turned off; restocking the inventory
of fuels used to cool the gas, known as refrigerants; and then actually cooling
the gas, said Mehdy Touil, who spent more than a decade at Ras Laffan and is now
the lead L.N.G. specialist at Calypso Commodities, a Berlin company.
The
damaged portions are another matter. QatarEnergy, which
operates Ras Laffan, has said it will take several years to repair those areas and
bring them online. (The company did not respond to requests for comment.) Ras Laffan
has 14 L.N.G.-producing units. The strikes last month took out the heart of two
of them — the mammoth structures in which gas is cooled — QatarEnergy’s
chief executive told Reuters. That equipment can be as tall as an 18-story building,
and the lead time for a new one can run two years or more, industry officials said.
“These
facilities were custom‑engineered and integrated into the broader Ras Laffan
complex, making them substantially more difficult to replace” than simpler kinds
of energy infrastructure, said Najmedin Meshkati, a professor
of engineering at the University of Southern California.
Less
is known about the extent of the damage to oil-processing facilities throughout
the region. A refinery on the west coast of Saudi Arabia had been operating at much
lower levels after a drone strike in mid-March, according to Rystad Energy, an Oslo-based
consulting firm. Rystad estimated that the refinery most likely could be fully restored
within a year.
Iran
has also suffered attacks on its energy infrastructure, including strikes on oil
depots in Tehran that turned the sky over the capital city black.
One
concern for rebuilding is that supply chains for some specialized parts have already
been stretched thin. The rush to build data centers for
artificial intelligence has created a demand for gas-fired power plants and other
energy infrastructure. Many of those facilities rely on equipment, like gas turbines,
that may also be needed to make repairs in the Gulf.
“If
you have the right supply chain, you can get things built back pretty quickly,”
said Mike Stice, a University of Oklahoma professor who serves on the board of energy
companies including the U.S. refining giant Marathon Petroleum. But, he added, timelines
will depend a lot on what has been damaged. “All it takes is one critical piece
of equipment that has a two-year delivery date.”
In
the end, however the conflict plays out, analysts expect energy prices to eventually
fall from wartime levels, but remain higher than they would have been in the absence
of war.
Analysts
at the French bank Société Générale recently said they expected oil to trade around
$80 a barrel at the end of 2026, up from their earlier forecast of $65. Traders
will be pricing in a greater risk of geopolitical disruption in the future.