The US and Iran have agreed a deal. How soon could the economy go back to normal?
US-Iran Deal: When Will the Economy Normalize?
The US and Iran have agreed - Following months of escalating tensions, the US and Iran have agreed to a historic deal that could reshape regional dynamics. This breakthrough marks a significant shift in the ongoing conflict, offering hope for stability in a volatile region. However, experts suggest that restoring economic normalcy may take weeks, if not months, due to lingering uncertainties and the need for broader implementation. The agreement’s potential to ease sanctions and reopen critical trade routes has sparked optimism, yet challenges remain in achieving immediate results.
The deal between the US and Iran comes amid a prolonged crisis that has disrupted global energy markets. The Strait of Hormuz, a vital artery for oil and liquefied natural gas (LNG), has seen restricted flows since late February, sending shockwaves through supply chains. With over 200 vessels trapped in the Gulf, the economic repercussions have been felt worldwide, driving up energy costs and creating volatility in markets. While the framework agreement aims to restore calm, its effectiveness hinges on resolving insurance and operational hurdles that have delayed shipping activities.
Experts Predict Timeline for Economic Recovery
Analysts believe the US and Iran's agreement could catalyze a gradual return to economic stability. Neil Shearing, Capital Economics' group chief economist, emphasized that the deal’s success depends on sustained cooperation and the removal of tolls on oil shipments. “The US and Iran have agreed to a framework, but full normalization requires time to address lingering concerns,” he said. Shearing estimated that oil flows might resume at 80% of pre-crisis levels within a month, though full capacity could take longer.
"Let the oil flow!" US President Donald Trump proclaimed, framing the deal as a step toward reestablishing trade. His optimism contrasts with cautious assessments from other experts, who note that the 60-day review period could be extended if new tensions arise. Florence Schmit of Rabobank warned that the agreement’s durability remains uncertain, with the potential for renewed sanctions or diplomatic friction affecting market confidence."
While the agreement offers a pathway to easing economic pressure, its impact on the broader global economy is still unfolding. The US and Iran have agreed to a temporary ceasefire, allowing for negotiations on long-term measures. However, the deal’s scope remains limited, with key details yet to be finalized. This ambiguity has kept investors on edge, as the market awaits clarity on how the deal will influence energy prices and trade relations.
Shipping Industry Adapts to the Crisis
The closure of the Strait of Hormuz has forced shipping companies to adopt emergency measures. Denmark’s Maersk and Germany’s Hapag-Lloyd are among the major carriers still navigating disruptions, with several vessels stranded in the Gulf. While Maersk has yet to adjust its operations, Hapag-Lloyd plans to retrieve four ships once the deal is signed and mines are cleared. These efforts highlight the resilience of the maritime sector, even as the US and Iran’s agreement provides a glimmer of hope for restored trade routes.
According to MarineTraffic data, only two ships exited the strait this week, underscoring the persistent challenges. The closure has historically handled about 20% of global oil and LNG supplies, and its disruption has caused a sharp spike in energy prices. Brent crude, for instance, reached $120 a barrel—a 70% increase from pre-war levels of around $70. However, the framework deal has already triggered a decline, with Brent falling to $83.55 as of Friday, signaling a tentative market recovery.
Analysts suggest that if the US and Iran’s agreement holds, the crisis could be mitigated within a few months. Florence Schmit noted that resuming pre-war traffic levels of 26 daily crude oil tankers would require a lasting ceasefire and confidence in the deal’s permanence. “The US and Iran have agreed to a temporary truce, but sustained stability depends on resolving insurance concerns and ensuring consistent cooperation,” she explained. This progress, though encouraging, still leaves room for potential setbacks.
Rising fertiliser costs, tied to oil by-products, have also strained agricultural economies. If the conflict eases, lower input costs could alleviate pressure on food prices, presenting a possible silver lining. The US and Iran’s agreement, therefore, not only addresses energy trade but also has far-reaching implications for global markets. While the deal is a critical step, its long-term success will determine whether economic recovery is swift or gradual.