The reopening of the Strait of Hormuz in June is "wishful thinking"! This bank believes that: oil prices may hit new highs in the summer, thereby impacting the stock market.

The practical passage through the Strait of Hormuz is severely obstructed, profoundly reshaping global energy pricing logic. But the market’s widespread expectation of a “reopening in June” may greatly underestimate the complexity of the crisis.

Royal Bank of Canada (RBC) Global Commodities Head Helima Croft is highly skeptical that the Strait will “reopen in June” or that shipping will return to pre-Middle East conflict levels in the short term. She describes market optimism as “magical thinking,” based on a fragile assumption: that enough economic pain will automatically trigger a policy lever to allow oil tankers to pass through the Strait again.

In contrast, Goldman Sachs, using a baseline of “initiating reopening soon, completing by the end of June,” predicts Brent crude will fall back to $90 per barrel by year’s end. Croft strongly refutes this, believing the market is severely underestimating the persistence and impact of the blockade.

She warns that if the current daily shutdown of about 12.5 million barrels continues, the cumulative loss by the end of the month will exceed 1 billion barrels; if extended into June, losses could approach 1.5 billion barrels. As summer demand peaks and inventories are heavily depleted, oil prices are “highly likely to surpass the peaks seen during the Russia-Ukraine conflict, approaching the 2008 highs,” ultimately requiring demand destruction to rebalance—at which point bond yields will rise sharply, and equities face significant downside risks.

Limited reopening pathways, constrained by diplomatic and military options

The prevailing “reopening in June” narrative mainly relies on two scenarios: either negotiations resolve the issue or the U.S. intervenes militarily on its own. But in Helima Croft’s view, neither scenario looks very optimistic.

Militarily, the U.S. theoretically could deploy over 100k ground troops to forcibly open the Strait, but the White House has no interest in a large-scale, long-term Middle East war, which also contradicts the “America First” campaign promises. Croft judges that any limited action would be insufficient to force a reopening, and a full invasion is not under consideration.

Diplomatically, reaching an agreement in the near term remains extremely difficult. Iran’s uranium enrichment capacity and stockpile issues remain unresolved, and more critically, even if nuclear talks succeed, Iran is unlikely to relinquish control of the Strait—its strategic deterrence value has now become comparable to its nuclear program itself, serving as a core bargaining chip, making it almost impossible to voluntarily relinquish control.

Dual blockade cannot shake Tehran’s resilience, which exceeds expectations

The White House initially hoped that a “dual blockade” would exert enough economic pressure to force Iran to loosen its grip on the Strait. Early predictions even suggested Iran’s oil reserves could be filled within 13 days, forcing Tehran to compromise quickly.

But the reality is that Iran still has buffer capacity of several weeks or even months in storage, and the leadership has demonstrated strong resilience. The authorities maintain firm control over security forces, with no obvious signs of internal fractures.

Therefore, Croft believes this strategy is unlikely to change Tehran’s strategic stance before June. While markets will continue to monitor whether regime stability might crack under fiscal pressure, currently, “dual blockade” is insufficient to alter Iran’s decision-making.

Even if reopened, traffic recovery will be slow

Even if the Strait of Hormuz eventually reopens in some form, as long as Iran retains operational control, actual transit volumes will remain well below pre-conflict levels. Croft points out that as long as Iran remains under sanctions, Western companies will be wary of the tolls it charges, and the risk of maritime attacks will continue to suppress shipping companies’ willingness to return.

Several leading shipping experts have explicitly stated that a reopening under Iran’s control would result in limited throughput; Iran’s clear military failures and unrestricted transit channels are the real prerequisites for full reopening of the Strait.

Referring to the Red Sea situation: Although the U.S. and Houthi forces reached a ceasefire agreement over a year ago, shipping volume in the Red Sea remains about 56% below pre-conflict levels, with many major shipping companies rerouting to avoid the Strait of Mandeb due to security concerns.

Croft believes that even if some form of normalization occurs in the Strait of Hormuz, throughput is likely to only reach the current limited levels seen in the Red Sea. Achieving this level alone would still take considerable time—ship scheduling and logistics operations after reopening would require weeks, not counting the time needed for shipping companies to reassess risks.

Oil prices may approach 2008 peaks, bond and stock markets both under pressure

Croft believes that with the full summer demand season underway and inventories heavily depleted, oil prices are highly likely to surpass the highs seen during the Russia-Ukraine conflict and approach the 2008 record peaks. In this scenario, demand destruction will ultimately serve as the market’s rebalancing mechanism—only prices high enough to suppress consumption can close the supply-demand gap.

However, before demand destruction truly occurs, bond yields will lead to a significant rise. Currently, global long-term interest rates are already breaking out, with inflationary pressures reigniting and leverage expanding rapidly, creating a tightening macro environment. The key point is that stock markets are now highly sensitive to bond signals—against this backdrop, the dual surge in oil prices and interest rates is likely to end with a sharp, not gentle, stock market decline.

Risk warnings and disclaimers

        Markets are risky; investments should be cautious. This article does not constitute personal investment advice and does not consider individual users’ specific investment goals, financial situations, or needs. Users should consider whether any opinions, views, or conclusions herein are suitable for their particular circumstances. Invest accordingly at their own risk.