How long will energy prices be held hostage by the Iran War?
What began on March 1, 2026, as a conflict that potentially could last 4-6 weeks, has turned into a war that has dragged on into the middle of May, double the original time estimate. Technically, a “cease fire” exists, but clearly, there is no truce. The Strait of Hormuz, a major passageway for up to 20% of the globe’s energy products, has effectively been shut down, creating a massive increase in energy prices.
Energy experts have offered different scenarios on how oil and refined product prices could behave. One comparison for this market often used has been the experience felt during the COVID pandemic.
During COVID – Loss of Demand
A weekend report from KPLER provided an inverse relationship to COVID with this statement:
“The pace of the current drawdown [in refined products] is comparable to what we witnessed in 2020 after the world effectively came to a standstill and inventories had risen so dramatically that oil prices briefly turned negative.”
Most people recall this period as the time when the global shutdown destroyed demand, forcing oil and refined products to find any available storage space to hold them.
Now – Loss of Supply
Now, however, the globe appears to be in the exact opposite position. A recent CNBC.com article quoted the co-founder of Sparta Commodities from a Squawk Box interview:
“In 2020, on average, we lost 9 million barrels per day of demand versus 2019, which is pretty much the equivalent of what we are losing now in terms of supply.”
There is no crisis regarding where to store oil and refined products (like what occurred in 2020), but rather a crisis of where will demand decline in order to adapt to this loss of daily supply. And Sparta Commodities’ founder has an answer for that:
” . . . it’s going to be a situation where the richer countries are going to pay up . . . You are going to end up in a scenario where poorer countries are going to have a humanitarian crisis.”
Impact of the Iran War on Energy Prices
But does any of this answer our original question? Citi analysts have stepped into the fray with this answer:
“We assume that the regime will make a deal that reopens the Strait around end-May.… but we continue to see the risks skewed towards this timeline being pushed out and/or a partial reopening, which means disruptions for longer.”
Conclusion
We don’t believe anyone has a definitive answer for when this war/conflict will end. However, Westlark Advisors is willing to offer this perspective on the war’s effect on energy prices: Energy prices may remain elevated for a longer period of time. Currently, we see “longer” as another 6-12 month timeframe. In addition, IF the present circumstances start to mirror the opposite of what happened during the COVID pandemic, then demand destruction may impact the world for 2-3 years post-Iran conflict. That could be bearish on prices during that time frame.
As the saying goes, “only time will tell.” And until we reach that time, we will continue watching for any indication of when this present conflict will stop holding sway over global energy prices.
Current Events – May 2026
By JD Buss
