Luxembourg's prime minister, Luc Frieden, may breathe a sigh of relief following the reopening of the Strait of Hormuz, a development that eases immediate fears of a global economic shock triggered by prolonged disruptions to energy supplies.
“I honestly believe that a major economic shock – not just an energy crisis – will occur if, over the next two weeks, this strait remains blocked because we will face shortages,” he said on 21 May 2026, on the EY stage at the Cercle Cité.
“Islamabad MoU shall enter into force with immediate effect, and as a first step, the Islamic Republic of Iran will instantly reopen the Strait of Hormuz, and the United States of America will immediately lift the naval blockade,” wrote Pakistani Prime Minister Shehbaz Sharif in a post early on 18 June 2026 on X after the United States and Iran signed an agreement. Reports indicated that two-way traffic resumed on Thursday. The path to a final resolution runs through a nuclear accord between Washington and Tehran.
Oil markets stabilise after Hormuz reopening
The global oil market is currently adjusting to the reopening of the Strait of Hormuz, with prices for Brent crude and New York WTI crude trading around $78 and $75, respectively. While some market participants had predicted an $80 floor following the reopening of this vital shipping route, current prices have already fallen below that level despite uncertainty over how quickly normal shipping flows will resume.
“Market futures suggest a period of stabilisation, with Brent expected to remain at or above $75 through the end of 2027 (see Chart 1),” said Vincent Juvyns, chief investment strategist at ING Belgium, in an interview on 18 June 2026.
ICE Brent futures Source: ING Belgium, LSEG datastream
Yet drivers in Luxembourg should temper expectations of a sustained decline in fuel prices. Juvyns noted that markets anticipate a potential decrease to between $70 and $75 by 2028, though a return to the pre-crisis level of $65 is not foreseen in the immediate future. A risk premium of roughly $10 remains embedded in oil prices, reflecting the lingering effects of the conflict and ongoing tensions with Iran.
Oil demand strengthens on multiple fronts
Several factors are exerting upward pressure on prices. Significant energy infrastructure damage has been reported across the region. For instance, Qatar has reported that 20% of its gas facilities were destroyed, and it is estimated that various oil terminals have been similarly compromised. Restoring full capacity could take months, if not years, in some cases, such as in Qatar.
Additionally, countries that drew down strategic reserves during the crisis are expected to rebuild inventories, creating an additional source of demand over the coming months. Robust demand is also expected during the peak summer season.
UAE and EVs cap oil’s upside
While these factors could keep prices elevated in the short term, several structural trends are expected to limit further gains. A major development is the United Arab Emirates' decision to leave OPEC and raise production capacity to 5.2 million barrels per day by 2027, according to the International Energy Agency.
The UAE currently produces between 3 million and 4 million barrels per day, compared with global production of roughly 102 million barrels per day before the conflict. According to Juvyns, the UAE is seeking to protect its market share as renewable energy gains ground globally.
Furthermore, the crisis has caused permanent demand destruction as consumers in Europe and China accelerate their transition to electric vehicles to avoid future energy insecurity. Concurrently, United States production has reached a high of 13.7m barrels per day, further increasing global supply (see Chart 2).
US crude oil production Source: ING Belgium, LSEG datastream
Fragile peace clouds post-crisis oil outlook
The geopolitical situation remains tenuous despite the signing of a memorandum, stressed Juvyns. Significant uncertainty remains regarding the proposed $300bn reconstruction fund and the mechanisms for reducing Iran's nuclear stockpiles. “One has to wonder how they managed to reach a deal,” he said.
The market remains cautious, especially following warnings from the US administration that military action could resume if Iran fails to comply with the agreement. In the long term, the outlook remains bearish if peace is sustained.
Although the reopening of the Strait of Hormuz has reduced the immediate risk of a supply shock, analysts increasingly view the longer-term outlook as one of persistent oversupply. If the ceasefire holds, additional production from the US and UAE, combined with lasting shifts towards electrification, could place renewed downward pressure on oil prices after the post-crisis replenishment cycle ends.
