As the Peace Talks on Iran Draw Near, How Soon Might Prices Drop?

(SeaPRwire) –   When U.S. President Donald Trump agreed to a fragile, temporary cease-fire with Iran on Tuesday, Brent crude oil dropped below $100 per barrel—an indication of relief for a global economy hit hard by the ongoing conflict. 

The possibility of peace talks may have soothed volatile markets, but the weeks-long U.S.-Iran war has already squeezed American pocketbooks by driving up gas prices and increased cost-of-living strains across the globe. Even though U.S. and Iranian officials plan to meet this weekend to start mapping a path out of the war, analysts told TIME that noticeable impacts on gas prices and other commodities might not be seen for a while.

“Even in the best-case situation, prices aren’t likely to drop sharply or right away,” says Bernard Aw, Asia-Pacific chief economist at insurance company Coface. Aw notes that while a cease-fire could lower market volatility “within weeks,” a significant decrease in oil and gas prices would take roughly three to six months.

Jamus Lim, an associate professor of economics at ESSEC Business School, told TIME that even if the current cease-fire eventually leads to the reopening of the Strait of Hormuz—a critical shipping lane through which about 20% of the world’s oil consumption flows and which Iran has effectively blocked since the war started—the conflict has already drained stockpiles of various commodities, including oil and natural gas. Lim said a precise timeline might be hard to determine, but he forecast that crude oil prices would stay around $100 per barrel until the end of summer.

“I don’t believe we’ll see any change—at the very least, not for the next year,” says June Goh, a senior oil market analyst at Sparta Commodities, when asked when crude oil prices might return to pre-war levels of about $75 per barrel. 

Goh explains that the war has taken 10 to 11 million barrels of crude oil out of daily production, and the stockpiles that were drawn down to handle the situation will need to be refilled. The high demand from restocking those lost oil reserves will keep prices high, she added.

Muyu Xu, a senior crude oil analyst at global trade analytics firm Kpler, noted that uncertainty about whether the Strait of Hormuz will fully reopen has scared off ships and made trade routes more complex. Since the war began, Iran has selectively closed the strait to its enemies, only letting non-hostile vessels pass, and opted to negotiate directly with certain countries rather than reopening it widely. Trump has called on Iran to reopen the strait to all traffic and previously threatened to destroy Iran’s “entire civilization” if no deal is reached.

“You have to persuade ship owners that it’s safe,” Xu told TIME. “No one wants to take that risk.”

Even if the strait were opened, Aw says the key question is “whether it will operate normally again.” “Shipping confidence, insurance costs, and logistical delays often linger long after fighting stops,” Aw noted. Trump has suggested to ABC News that the U.S. and Iran should together charge fees for ships passing through the strait. 

What to expect at the pump 

Due to the war, U.S. gasoline prices—gasoline is a refined product of crude oil—have climbed above $4 per gallon, the highest since the Russia-Ukraine war started in 2022 and $1 more than in February, before the conflict began. 

As oil prices fall, there’s an expectation that gasoline prices will follow suit. But any change won’t be immediate, thanks to the oil refinery supply chain, which can take months: crude is sent to a refinery to make gasoline, then transported to a distribution center, and finally to gas stations across the U.S.

Central bank economists say fuel prices rise like “rockets” and fall like “feathers.” Aw from Coface notes that even if oil prices drop right away, consumers usually see partial relief in retail fuel prices only after one or two months. This delay, Aw explains, stems from “the layered pricing structure—existing stockpiles, refining profits, distribution costs, and taxes all contribute.”

Xu says countries are also eager to put their own needs first. Many Middle Eastern nations—major global oil suppliers, especially to Asia—have seen their oil refining capacity reduced in the war’s aftermath, so it will take time for gasoline and other refined petroleum product supplies to return to normal. 

The ever-changing situation in the Middle East will also impact fuel supplies at individual vendors and stations. But if the fighting ends, consumers will “definitely be relieved that prices aren’t going up any more,” says Lim from ESSEC Business School.

 —Miranda Jeyaretnam contributed reporting.