Last Thursday, US President Donald Trump threatened to wipe out the Kharg oil island off the coast of Iran, in retaliation for Iran’s downing of an attack helicopter. On Monday, the US and Iran both confirmed their intention to sign an agreement in which the ceasefire will be extended by 60 days and further negotiations can take place. They also promised that the Strait of Hormuz will reopen.
The oil price immediately fell after this news. But confidence in the agreement in the energy world is still fragile. For months, Trump has been proclaiming that the war would end quickly, and then the mutual shelling erupted again.
There are therefore doubts as to whether the new truce will last and whether both parties will adhere to the agreements. This leads to uncertainty about how quickly the transport of oil and gas will restart and whether the price declines will continue. Five questions about the practical and economic consequences of reopening the Strait of Hormuz.
1How do the sectors that have been hit hard by war and the closure of the Strait of Hormuz respond?
If ships carrying oil and all kinds of oil products can pass through the Strait of Hormuz again, the costs of fuels such as gasoline and diesel will decrease. Good news for transport companies, farmers and airlines, for whom fuel has become a growing cost item in recent months.
Willem-Jan van Vorstenbos of transport company Maters from Huissen, Gelderland, suspects that not much will immediately change for his company. Many transport companies have made agreements about fuel prices with their clients. The direct bill for high prices at the pump has therefore been borne by clients in recent months. “I can imagine that they are relieved about this development.”
Van Vorstenbos is quite skeptical about the agreements between the US and Iran. “The document is only one and a half A4 pages and President Trump can always change his mind. First see, then believe.”
Agriculture also largely runs on fuel. Jos Verstraten, chairman of the LTO dairy farming group, calls the opening of Hormuz good news. Everything in agriculture, dairies and wholesale runs on diesel, which is normally cheaper than petrol in the Netherlands. “Since the war in Iran, the price of diesel has risen by 60 percent.”
Fertilizer production has also become more difficult in recent months, as gas prices have also risen. Natural gas is needed for the production of fertilizer. It will be good if these prices stabilize again, says Verstraten, although it will make little difference this year. The fertilization season is over in the Netherlands.
And then there is the kerosene. This has also become much more expensive, because refineries in the Gulf States in particular produce kerosene, which could no longer leave the area due to the closure of the Strait of Hormuz. Unlike oil, for example, the high prices are not simply caused by a shortage that is expected in the future. It will only be resolved when ships actually start sailing again.
2What needs to be done on site so that the ships stuck in the Strait of Hormuz can start sailing again?
Before ships can sail on a large scale again, the sea mines that Iran has laid in the strait in recent months must first be cleared. The plan that the US and Iran will sign includes that Iran will be given thirty days to clear the sea mines, Bloomberg news agency wrote on Wednesday. It is still unknown exactly how the clean-up will work. With a ‘clean’ seaway, the next step arises: getting the insurance of the ships and their cargo in order. At the beginning of March, a number of cargo ship insurers canceled ‘war cover’. In the other cases, premiums were significantly increased.
Marijke van der Rest, insurance broker at Ship Insurance International, is in regular contact with insurer Lloyds in London. “The insurers actually continue to calculate premiums in the same way as they always do. Insurers move along with developments. In any case, everything can always be insured, even in war situations.”
There are still people on the ships. These crew members are not yet optimistic about the agreement between the US and Iran, says Richard Moti, chairman of the Nautilus International trade union. The trade union for employees in the maritime sector mainly hears cynicism among crew members. “It is about the thirtieth time that the opening of the strait has been announced; they actually don’t believe it anymore.”
3What is the state of the oil infrastructure in the Gulf States?
Especially in the first six weeks of the war, a lot of energy infrastructure suffered, both in Iran and in surrounding countries. Installations around the large South Pars gas field, which Iran shares with Qatar, were bombed, drones bombarded oil fields in Iran, Kuwait and Saudi Arabia, the Iranian oil island of Kharg was an attractive target for the US and Iran carried out attacks on refineries in Saudi Arabia and Bahrain, among others.
By mid-April, there had already been 58 billion dollars in damage to energy infrastructure, according to a calculation by energy research agency Rystad Energy, of which 19 billion in Iran. Presumably not much else was added, because a ceasefire was declared at the beginning of April.
Much of the damage has already been repaired or repairs are underway. For example, the Saudi oil company had already patched up the Ras Tanura refinery in mid-March, after a drone attack on March 2.
In Qatar, the March 17 attack on the gas facilities in Ras Laffan has long-lasting consequences. The country expects to return to 50 percent of LNG production within a month of the reopening of ‘Hormuz’ and to 80 percent after two months. That will be the case for the time being, because two of the fourteen facilities where gas is cooled into liquid form are so damaged that repairs will take years.
4How quickly will the oil flow again to ‘normal’ when the Strait of Hormuz opens?
Ships to and from the Strait of Hormuz take weeks to travel, to Europe and the US longer than to Asia and Africa. So when the Strait of Hormuz opens again, it will take weeks before the scarcity of oil, diesel and kerosene will be over.
Yet the price that petrol and diesel drivers pay at the pump in the Netherlands has already fallen, and the market price for oil is plummeting this week. At the beginning of June, a barrel of Brent oil was still trading for 95 dollars, this Wednesday it is 78 dollars. The price of gas also fell, albeit less sharply.
“That is because there is a lot of market speculation in those prices,” says Hans van Cleef of EqoLibrium, a research agency for energy scenarios. “In recent months, traders have seen the oil price make a nice upward journey. This time, the agreements between the US and Iran seem more serious than previous speculation about an agreement. Traders expect the price to fall and think it is wise to sell now. This is causing the sharp price drop now, even before there is actually more oil on the market.”
Before the war started, the price of oil fluctuated between $60 and $65. “I don’t see the oil price going back to that anytime soon,” says Van Cleef. “Iran can just close the Strait of Hormuz, that realization is a genie out of the bottle. I therefore expect that some kind of risk premium will be charged on top of the normal price for everything that depends on the Strait of Hormuz.” It is also still unclear whether Iran itself will levy some form of toll on shipping. Trump says no, Iran hints that it does.
In recent months, a lot of money and attention has been focused on alternative ways to transport oil and gas. The United Arab Emirates and Saudi Arabia want to significantly expand their oil pipelines. It is expected that the countries will still implement their intentions when the Strait of Hormuz is open again, in order to reduce dependence on the strait. “There are no alternatives for gas yet,” says Van Cleef. “That will still take a few years.”
Separately, countries are reducing their dependence on the Middle East. For example, last week it was announced that Japan had signed a twenty-year contract with Malaysia for the supply of LNG. Libya and Nigeria have also become more prominent as oil production countries.
5What are the consequences for the economy in the Netherlands and Europe?
Fatih Birol, director of the International Energy Agency, warned last week NRC that Europe would end up in a ‘red zone’ if the Strait of Hormuz was not opened by the end of June. In addition to high prices at the pump, rising inflation and reduced economic growth would be unavoidable, he believed. Europe appears to be spared that disaster if the agreement between the US and Iran holds up.
Last week, the Dutch Central Bank published estimates for inflation and economic growth in the Netherlands. Energy prices have a major influence on this. For the basic estimate, the bank assumed an oil price of around 100 dollars in the third quarter of 2026, with inflation at 2.6 percent and economic growth at 0.8 percent. These figures showed a less dramatic picture than previously feared.
And now the oil price is already considerably lower than 100 dollars. If the impending peace holds, inflation and economic growth could turn out to be more positive than forecast last week.
But there are still many uncertainties about how the economic damage suffered over the past four months will continue to translate. In higher prices for food and transport, for example. Higher prices in the store can translate into wage demands and thus trigger the classic wage-price spiral. Inflation will therefore not disappear in one fell swoop.