The preliminary peace agreement between Washington and Tehran has already eased pressure on energy markets, pushing European gas prices lower and reducing oil benchmarks. Yet significant uncertainties remain over supply restoration, logistics, and the future of the Strait of Hormuz.
How the US-Iran peace deal is reshaping energy markets
“Let the oil flow.” With those words, U.S. President Donald Trump announced on June 14 the framework of a preliminary peace agreement between the United States and Iran. Iranian officials have confirmed the deal, which is expected to be formally signed in Switzerland on June 19, potentially bringing an end to more than 100 days of conflict.
“Both sides have declared an immediate and permanent cessation of military operations on all fronts, including Lebanon,” Pakistani Prime Minister Shehbaz Sharif wrote on X.
Strait of Hormuz reopening boosts market confidence
The agreement also includes the resumption of maritime traffic through the Strait of Hormuz, prompting an immediate reaction from energy markets.
In Europe, natural gas prices had already begun declining as signs of a potential agreement emerged. On June 15, 2026, benchmark gas prices fell below €43/MWh, their lowest level in five weeks, although still well above pre-conflict averages.
Oil markets followed a similar trajectory. Brent crude dropped to $83 per barrel, its lowest level in two months, while West Texas Intermediate fell to around $80 per barrel. Energy stocks also retreated sharply after reaching record highs in recent months.
Still, expectations should remain measured. The peace agreement has not yet been formally signed, and the memorandum leaves several critical issues unresolved, including the long-term operational stability of the Strait of Hormuz. At this stage, uncertainties continue to outweigh certainties.
The European Union is well aware of these risks. While welcoming the agreement, Brussels continues to urge member states to accelerate supply diversification efforts.
“Once again, energy dependence has been turned into a weapon,” said Ursula von der Leyen. “We must diversify our supply routes and develop alternative export corridors so that we are no longer dependent on the Hormuz bottleneck.”
Oil recovery likely to be gradual
Industry analysts believe it will take time before oil production returns to pre-crisis levels of roughly 20 million barrels per day.
The main challenge will be logistics, restoring export flows and safely restarting production facilities. Even if the peace agreement is finalized, regional tensions are expected to persist, encouraging operators to proceed cautiously. The most likely scenario is a gradual and tightly managed recovery.
“In this case,” analysts at Wood Mackenzie wrote, “fields affected by the Strait closure could return to 70% of previous production within three months and 90% within six months. Reaching the final million barrels per day could take considerably longer.”
LNG supply outlook points to future oversupply
The agreement is also unlikely to trigger an immediate rebound in liquefied natural gas exports.
Under the most optimistic scenario, undamaged LNG facilities could restart operations in July 2026 and gradually return to full capacity by 2027. According to analysts Massimo Di Odoardo, Alan Gelder, Gavin Thompson and Pietro Martino of Wood Mackenzie, “the expected oversupply, although delayed until 2028, remains inevitable once the Strait reopens.”
A massive wave of new LNG capacity is currently under construction worldwide. As a result, global supply is projected to increase by roughly 50% compared with current levels, restoring confidence in LNG markets and supporting a new phase of demand growth across emerging Asian economies.
However, the combination of weaker short-term demand and rising supply could create a significant market imbalance. Analysts suggest that LNG cargo cancellations from the United States may be required to rebalance the market.
If that scenario materializes, European gas prices could be cut in half by 2031 before recovering modestly between 2030 and 2035.
