Ceasefire looks fragile

Oil traders cheered a two-week U.S.-Iran ceasefire on April 8, and crude prices immediately fell, but by April 9 prices were climbing again as ships still faced Iranian controls in the Strait of Hormuz and the truce’s terms were already being disputed. (usnews.com) (cnbc.com) The gap between “ceasefire announced” and “oil moving normally” is the whole story here. On April 8, Reuters reported that markets were betting energy supplies through the Strait of Hormuz could resume, but by April 9 Abu Dhabi National Oil Company said ships still needed Iran’s permission to pass. (kitco.com) (cnbc.com) The Strait of Hormuz is not a side route. The United States Energy Information Administration says about 20 million barrels of oil a day moved through it in 2024, equal to about one-fifth of global petroleum liquids consumption, and about one-fifth of global liquefied natural gas trade also passed through it. (eia.gov 1) (eia.gov 2) That means a disruption there hits two markets at once. Oil from Saudi Arabia, Iraq, Kuwait, the United Arab Emirates, and Iran uses the strait, while Qatar sends a large share of its liquefied natural gas cargoes through the same narrow passage. (eia.gov 1) (eia.gov 2) Even if no missile is fired today, shipowners still have to decide whether to send crews into a corridor where traffic was recently disrupted and rules remain unclear. Lloyd’s List reported on April 8 that more than 800 vessels had been stranded in the Gulf since late February and that transit protocols after the ceasefire were still uncertain. (lloydslist.com) Insurance turns that fear into a number. S&P Global reported on March 30 that the additional war-risk premium for tankers in the Persian Gulf had eased from about 2.5% to 1% of a ship’s hull-and-machinery value per seven-day period, which is lower than the peak but still far above normal. (spglobal.com) A ceasefire does not erase those costs overnight, because insurers, charterers, port operators, and ship captains all wait for a few uneventful voyages before acting like the danger is gone. S&P Global reported on March 3 that war insurance for Hormuz had effectively dried up as the conflict intensified, and rebuilding that market takes time even after fighting pauses. (spglobal.com) There is also a physical bottleneck that diplomacy cannot widen. The Energy Information Administration says there are very few alternative routes to move oil out of the Gulf if Hormuz is constrained, which is why even partial interference can keep a risk premium in oil prices. (eia.gov) That premium shows up far from the Gulf. When crude stays expensive, refiners pay more for feedstock, airlines pay more for jet fuel, trucking companies pay more for diesel, and factories pay more to move plastics, chemicals, metals, and food through global supply chains. (eia.gov) (usnews.com) So the market is treating this ceasefire less like a reset button and more like a short extension cord. It can keep the lights on for a couple of weeks, but until ships move freely, insurance normalizes, and Gulf exporters prove they can load cargoes on schedule, oil traders will keep pricing in the chance that the next disruption is only days away. (cnbc.com) (lloydslist.com)