U.S. and Iran reach initial deal, but economic recovery will be slow

The first U.S.-Iran deal reopened a path to the Strait of Hormuz, but the economic reset will not be immediate. A senior administration official said the agreement would lift the U.S. blockade and launch a 60-day period for technical negotiations, while shipping sources warned that mines in the waterway could keep vessels sidelined for weeks.

Markets moved quickly on the diplomatic news, then just as quickly turned back to the practical problem of restoring supply. Brent crude and West Texas Intermediate rebounded Tuesday after earlier declines, with Brent at $83.42 a barrel and WTI at $81.12, as traders judged that reopening Hormuz would take longer than a headline deal suggested.

The IMF has already put hard numbers on the damage. Kristalina Georgieva said global oil supply remained down by about 13 percent relative to pre-war levels, while global LNG supply was down about 20 percent. In a separate IMF note, she said more than three months into the war, the world economy had held up, but commodity prices, inflation and financial conditions had all been affected, and oil prices were still about 30 percent above pre-war levels.

The bottlenecks go far beyond crude. UNCTAD said the Strait of Hormuz carries around a quarter of global seaborne oil trade and significant volumes of liquefied natural gas and fertilizers, with higher freight rates, bunker fuel costs and insurance premiums feeding into food prices and cost-of-living pressures. That means the first relief may show up in sentiment and wholesale markets, while household budgets, shipping schedules and factory input costs remain under strain.

Even if the agreement holds, the return to normal will depend on work that diplomacy cannot finish by itself. Shipping and maritime security sources said scouring the strait for mines could take 40 to 50 days before insurers, carriers and oil companies feel confident enough to resume regular traffic. Until that happens, the U.S.-Iran breakthrough will ease one choke point, not restore the global economy overnight.