Key takeaways

  • The ceasefire in the Iran war provided a relief rally for stock markets as oil prices dropped, but analysts say significant uncertainty remains.
  • Analysts warn it could be some time before oil prices return to pre-war levels, given the disruption to shipping, insurance, and physical supply chains.
  • Damaged oil production hubs could take four to six weeks to come back online, according to Capital Economics.

There may be a ceasefire in the Iran war, but analysts caution that investors shouldn’t expect the global economy and markets to return to normal soon.

The announcement of a two-week ceasefire—and negotiations to bring about a permanent conclusion to the war—boosted stock markets and sent oil prices falling. But questions remain over how talks will progress, whether the Strait of Hormuz can remain reliably open, and how quickly shuttered energy production can resume. In addition, the substantial damage to energy and industrial infrastructure in the region will mean some supply chains, such as those for liquified natural gas or aluminum, could take months or years to rebuild.

“The road to normalization is long and paved with multiple layers of uncertainty,” says Ole Hansen, head of commodity strategy at Saxo Bank.

Oil and gas prices to remain elevated

More than five weeks of fighting in the Middle East have taken dozens of refineries, storage facilities, and oil and gas fields offline, while insurance premiums soared and shipping through the Strait of Hormuz came to a near-standstill. Any return to normalcy is likely to be very “stop-start,” according to Capital Economics chief climate and commodities economist David Oxley.

Oxley believes clearing the shipping logjam in the Strait could take at least 10 days. Meanwhile, he thinks it could take four to six weeks for oil production to restart at shuttered facilities across the Gulf, if enough tankers are incentivized to enter the Strait, given the ongoing risks.

The amount of shipping traffic that will start heading through the Strait is a significant unknown, according to Matthew Ryan, head of market strategy at Ebury. “Uncertainty also remains as to the extent of vessel flow through Hormuz, given still extremely high insurance premiums and the elevated risk of further attacks,” he explains. “We expect volatility to remain high in the coming days, as investors scrutinize both details out of the negotiations and vessel traffic data.”

Brent crude oil futures fell 14% to $94 per barrel on Wednesday, but prices remain up 30% since before the war began. “The ceasefire offers no guarantees that hostilities between the US, Israel, and Iran have come to a permanent conclusion, and consequently, when oil and gas supply from the region will begin to normalize,” says Morningstar international economist Grant Slade.

At Capital Economics, oil prices are now seen hovering around $95 through the second quarter before falling to $80 by year-end.

“The oil price we had become accustomed to pre-war is unlikely to return in the current environment,” says Lindsay James, investment strategist at Quilter Investors.

Meanwhile, gas supplies will likely take longer still to normalize, given severe disruption to facilities. QatarEnergy, the world’s largest producer of liquified natural gas, declared force majeure last month and warned that Iranian attacks had wiped out 17% of its capacity for up to five years. “That isn’t coming back anytime soon. I still don’t think we’ve fully seen the implications of that in the global energy market,” Oxley says. “Even in a return to normalcy, the fact that there has been long-term damage to gas facilities means that there will be ongoing scarring.”

European natural gas prices, measured by the European TTF benchmark, fell 15% on Wednesday to 45 EUR per MWh. Capital Economics says it sees prices remaining around that level in the second quarter before climbing in the second half of the year as key importers in Europe and Asia vie for supplies. Oxley adds that critical byproducts of LNG, including nitrogen-based fertilizers and helium (used in semiconductors and medical equipment), could continue to face disruption for some time to come.

Nevertheless, analysts suggest a full return to risk-on trading will be contingent on successful talks. “We suspect that market participants will not fully commit to ‘risk on’ trading, nor will oil futures or the dollar return to pre-war levels, until a permanent deal is struck,” says Matthew Ryan, head of market strategy at Ebury.

Bond yields drop as oil prices fall

Government bond prices likewise climbed, and yields fell, on hopes of an improved inflation outlook, as markets pared recent expectations for interest rate hikes. In the US, bond traders Wednesday notched up the potential for two Federal Reserve rate cuts in 2026 rather than one. For a time in March, expectations began to build that the Fed might raise rates this year.

Saxo Bank chief investment strategist Charu Chanana says markets may once again begin pricing in some rate cuts, but she added that they are “unlikely to fully erase the recent shock unless energy flows normalize quickly and diplomacy holds.” She continues: “This is a pause, not a full reset, so tactical relief can continue near term, but structural risks around oil, inflation, and geopolitics have not disappeared.”