Hormuz Shutting A Disconnect Between Market Expectations, Reality—Energy Experts

Global energy analysts have raised questions over Iran’s decision to again close the Strait of Hormuz after briefly reopening the critical waterway underscores growing uncertainty in global oil markets.

An industry expert warns that the disruption remains “untenable” for the global economy.

Arjun Murti, partner at Veriten and a longtime energy markets analyst, said the stop-start nature of flows through the Strait is exposing a key disconnect between market expectations and reality.

“The closure of the Strait is completely untenable for the global economy,” Murti told World Oil. “The longer it stays closed, the greater the risk.”

The Strait of Hormuz, which typically carries about 20 per cent of global oil and LNG shipments, had shown signs of reopening following a ceasefire announcement earlier this month. However, Iran’s renewed closure highlights the fragility of those conditions and the difficulty in restoring consistent transit flows.

Murti said markets have been operating under a flawed assumption since the initial ceasefire.

“The market has been operating under the view that the Strait is about to imminently re-open ever since the initial ceasefire was announced just after Easter,” he said. “So far, that has not proven correct.”

He added that expectations of a definitive outcome may be misplaced. “The idea that there will be a clean ‘open’ or ‘closed’ may be what the market is most getting wrong now.”

Instead, intermittent disruptions and partial reopenings could define the near-term outlook, complicating supply expectations and price signals.

While oil prices initially eased on news of a reopening, continued volatility in flows raises the risk of renewed price spikes. The risk becomes even higher if shipping volumes fail to recover in the coming weeks.

“If that does not happen, news of fuel shortages in Asia and possibly Europe will grow,” Murti said.

For upstream operators, the immediate response remains cautious.

Murti expects most companies to maintain capital discipline in the near term, with first-quarter earnings likely to reflect a “wait and see” approach amid uncertainty on oil prices and the global economy.

At the same time, he said the disruption could reinforce interest in non-OPEC supply, including U.S. shale, deepwater developments and Canada, though without a broad shift away from disciplined investment strategies.

Ultimately, Murti said the trajectory of oil markets hinges on whether stable flows through Hormuz can be restored.

“It goes back to the Strait,” said Murti. “The Strait reopening and global economic growth continuing is what oil and gas companies should most be hoping transpires, even with a near-term retreat in oil prices. Global recession is not good for anyone.”