"Not fixable over the weekend": Middle Eastern energy system reconstruction may take years

Ask AI · Why is the Middle East energy rebuilding compared to a stubborn mule?

Even if the Strait of Hormuz becomes “unconditionally open,” the Middle Eastern oil market cannot quickly return to normal. Damaged infrastructure, disrupted transportation systems, and a lack of market confidence combine to make the recovery period at least 3 to 6 months, or even longer.

No one currently knows when the Strait of Hormuz will fully reopen, but after more than a month of destruction caused by the Iran war, rebuilding and repairing the energy infrastructure in the Middle East, as well as restoring production across the region, are the most critical factors for the global oil market.

Manish Raj, Managing Director of Velandera Energy Partners, said that the world has “lost over 250 million barrels of oil, and the loss is still expanding daily.”

Raj stated in an interview, “The restart process is like a stubborn mule,” and “re-energizing the damaged energy core is a years-long battle of destruction and reconstruction, not a DIY project that can be completed over a weekend.”

Hormuz Strait Closure Triggers Historic Supply Shock

Since the U.S. and Israel launched military strikes against Iran on February 28, and war broke out, the Strait of Hormuz—responsible for about a quarter of global maritime oil trade, roughly 20 million barrels per day—has been essentially closed.

The International Energy Agency (IEA) said that this Middle East war has caused the “largest supply disruption in global oil market history,” with crude oil and petroleum product flows through the Strait of Hormuz dropping from about 20 million barrels per day to a “trickle.”

Meanwhile, due to rapidly filling storage space, Gulf countries have been forced to cut total production by at least 10 million barrels per day. Additionally, alternative routes bypassing the strait are very limited.

On March 11, the IEA announced the release of a record 400 million barrels of emergency oil reserves to help offset supply losses, but this scale only covers about four days of global oil demand.

Uncertain Reopening Outlook, Recovery Could Take Years

Senior oil market analyst June Goh of commodity analysis firm Sparta Commodities posted on X platform on Wednesday that the logistics of reopening the Hormuz Strait will be “chaotic.” She said that market confidence needs to be rebuilt and emphasized that “unconditional” reopening is crucial, but it will take time: “Don’t expect too much.”

The energy market recovery timetable set by the firm shows that even if the Hormuz Strait is unconditionally reopened, it will take at least 3 to 6 months for the Middle Eastern oil market to return to normal.

June Goh noted that some refineries suffered severe damage during the attack, and repairs could take at least a year. She also pointed out that Qatar’s liquefied natural gas (LNG) facilities were damaged in the Iran attack, with recovery potentially taking 3 to 4 years.

Sparta warned that if Gulf infrastructure—including refineries, pipelines, and terminals—requires large-scale repairs, the recovery time will be further extended.

Additionally, restrictions on war risk insurance may persist, causing some ships to avoid the region; overall, the conflict could also bring “security uncertainties,” further delaying shipowners’ confidence rebuilding.

Rising Oil Prices and Global Response Intensify Urgency

Adam Turnquist, Chief Technical Strategist at independent U.S. trader LPL Financial, said it would be surprising if the U.S. decided to withdraw from the region and essentially hand the strait over to Iran. He pointed out a potential global risk: Iran might start charging tolls on every oil tanker passing through the strait, turning it into a new high-yield revenue source.

Turnquist believes that these factors mean that risk premiums in oil prices are unlikely to subside, so the idea of oil prices falling back below $70 per barrel is “almost unrealistic.”

Meanwhile, the urgency to end the war and reopen the Strait of Hormuz is growing. “All countries are doing their best to mitigate domestic shocks while hoping the situation can be resolved quickly—by any means,” Goh said.

The rising cost of aviation fuel has prompted some airlines to raise ticket prices and cut flights; the Philippine government announced a state of energy emergency on March 24; Australia has called on the public to conserve fuel.

In the U.S., the Environmental Protection Agency has issued temporary waivers allowing the sale of E15 gasoline (containing higher ethanol content and priced lower than regular unleaded gasoline) to ease fuel price pressures.

Supply shocks are expected to spread eastward. Goh from Sparta said that the impact on Asia is particularly severe, with many countries heavily dependent on imports experiencing fuel rationing. Bangladesh has shut down universities and implemented fuel price caps; Pakistan has shortened workweeks; Thailand has asked civil servants to work from home.