The US and Iran have reached a memorandum of understanding to end their conflict and reopen the Strait of Hormuz, a development expected to ease long-term oil supply concerns but leave physical crude markets tight through the summer months, with oil futures falling 4% on the peace framework news.
US President Donald Trump announced the framework deal June 14, saying the strait would reopen “toll-free” and lifting the US naval blockade on Iranian ports. The formal agreement is scheduled to be signed in Switzerland on June 19, though full terms remain undisclosed and significant uncertainties persist.
Iran’s semi-official Fars News Agency reported that vessel transits would be toll-free for 60 days. According to Iranian state media, toll-free passage through Hormuz is set to commence for a period of 60 days, after which Iran and Oman will manage it.
Oil market normalization timeline
The agreement will extend ceasefire by 60 days, reopen the Strait of Hormuz and begin nuclear negotiations. The pact allows for the gradual reopening of the strategic waterway that has been in effect shut since late February, increasing global energy prices.
US Energy Information Administration (EIA) expects global oil production and trade flows to largely return to pre-conflict levels by late 2026 or early 2027, even as risks around the Strait of Hormuz continue to weigh on the oil market. “Even after flows resume, we expect it will take until late 2026 or early 2027 for most pre-conflict production and trade patterns to resume,” the EIA said.
The US-Iran memorandum of understanding to reopen the Strait of Hormuz toll-free for 60 days marks a significant de-escalation in Middle East tensions that has driven oil futures down 4%, but the 4% price decline may be overly optimistic given normalization timelines extending through summer 2027.
The toll-free transit arrangement, while providing immediate relief, is temporary. Iran’s commitment to demining the strait and refraining from charging tolls during the 60-day ceasefire extension represents a first step, but post-60-day management by Iran and Oman introduces uncertainty about whether toll-free passage will extend into the final accord.
Saudi Aramco CEO Amin Nasser’s May 11 warning that oil markets won’t normalize until 2027 if Hormuz disruption persists aligns with the EIA’s projection that traffic through the Strait won’t return to pre-conflict levels until early 2027, despite expecting the strait to reopen in Q3 2026. This 12-18 month normalization gap suggests physical crude markets will remain tight through summer 2027.
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