INTERVIEW: Asian oil flows will take months to normalize after US-Iran peace deal

Asian crude oil importers, such as India, should not expect an immediate respite from a tighter global crude supply situation despite the peace deal between the US and Iran, as it will take months for flows through the Strait of Hormuz to normalize, Shrikant Madhav Vaidya, former chairman and managing director of state-run Indian Oil Corp., said June 15.

The comments came as US President Donald Trump announced the completion of a US-Iran peace deal that would reopen the Strait of Hormuz and lift the US blockade of Iranian ports. Crude oil futures fell to three-month lows in midmorning trading in Asia on June 15 after Trump's announcement.

At 11:03 am Singapore time (0303 GMT), the ICE August Brent futures contract fell $4.15/barrel (4.75%) from the previous close to $83.18/b, while the NYMEX WTI July light sweet crude contract fell $4.73/b (5.57%) to $80.15/b over the same period.

"Energy markets will surely welcome the announcement of the peace deal. But my assessment is that a return to January 2026 levels of confidence and operational normalcy could easily take a few months," Vaidya told Platts, part of S&P Global Energy.

Trump, in a June 14 post on his social media platform, Truth Social, said, "The Deal with the Islamic Republic of Iran is now complete. Congratulations to all! I hereby fully authorize the toll-free opening of the Strait of Hormuz, and, simultaneously herewith, authorize the immediate removal of the United States Naval blockade. Ships of the World, start your engines. Let the oil flow!"

Iranian state television confirmed an agreement had been reached.

Pakistani Prime Minister Shahbaz Sharif said on X, formerly known as Twitter, that both sides had declared an immediate and permanent termination of military operations on all fronts, including in Lebanon, and that the official signing ceremony for the deal will be held on June 19 in Switzerland.

Restoring confidence

Vaidya said the Strait of Hormuz is not merely a waterway, but one of the world's most critical energy arteries, carrying roughly 20 million barrels/day of crude oil, condensate and petroleum products, along with a significant share of the global LNG trade.

"When a system of this scale is disrupted, restoring flows is only the first step. Restoring confidence takes much longer," he said, adding that several factors need to be realigned before normal oil flows can resume.

"Physical security must be reestablished through safe navigation corridors, threat assessments, maritime surveillance and verification that residual risks no longer exist. Marine insurance markets must regain confidence. War-risk premiums rarely disappear simply because a ceasefire is announced," Vaidya said.

He added that tanker fleets would need to be repositioned initially, as weeks or months of disruptions had altered ship deployment patterns, charter commitments and freight economics across global shipping markets.

A June 12 report from S&P Global Commodities at Sea showed seven ships transiting the Strait of Hormuz on June 11, including four oil tankers, down by six from the previous day. Actual transit volumes, however, are likely higher than recorded levels due to signal suppression and interference, according to CAS.

"In energy logistics, reopening is an event. Normalization is a process. And in most cases, restoring confidence takes considerably longer than restoring flows. The true test is not whether the strait is open. The true test is when shipowners, insurers, traders and refiners once again conduct business as though disruptions are no longer a credible risk," Vaidya said.

Reversing decisions

Vaidya said that refineries and buyers will need to rebalance supply chains, as during the conflict, refiners had adjusted crude slates, inventories and procurement strategies. These decisions are not going to be reversed overnight.

"Most importantly, market participants must believe the crisis is truly over. A ceasefire or deal after a fierce war is, by definition, a fragile arrangement. Shipowners, insurers, charterers, traders and refiners will all ask the same question: What is the probability that hostilities resume next week or next month?" Vaidya said.

As long as that probability remains meaningful, risk premiums will persist, and commercial behavior will remain cautious, he added.

"The first tanker passing through the strait after a ceasefire will make headlines. The hundredth tanker will signal normalization," Vaidya said.

He added that refineries are no longer merely downstream industrial assets -- they are increasingly becoming strategic national shock absorbers, operating at the intersection of energy security, geopolitics, industrial growth and resilience.

"The ongoing geopolitical disruptions and Strait of Hormuz uncertainties have reinforced a critical lesson: energy security is increasingly being built inside the refinery gate, not merely at the oil well," Vaidya said.

He added that India's refining strength lies not only in scale, but in operational adaptability. Indian refineries today process an exceptionally diverse crude slate spanning Middle Eastern, Russian, African, US and Latin American grades.

Vaidya said that India avoided major gasoline and diesel shortages during the conflict largely because of domestic refining optionality.

"Countries importing crude and refining domestically possess far greater operational flexibility than countries dependent on imported finished products. Product insecurity can become more acute than crude insecurity. Product markets -- especially diesel, jet fuel and LPG -- can tighten faster and transmit inflationary stress more directly than crude oil itself," he added.