Energy markets face a drawn-out normalisation even if Friday’s MOU signing proceeds without incident. S&P’s projection that second-half 2026 shipping volumes will run at roughly three-quarters of pre-war levels puts a ceiling on any near-term price relief. Insurance constraints, infrastructure damage, and residual risk aversion are expected to suppress flows well into 2027, keeping the geopolitical premium embedded in crude prices sticky. The real test for markets will be whether the agreement holds through subsequent negotiations on Iran’s nuclear programme and proxy networks, the issues most likely to trigger a reversal.
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S&P Global Ratings says the US-Iran Hormuz framework aligns with its base case but won’t alter forecasts, warning shipping recovery will remain well below pre-war levels into 2027.
A deal framework is welcome; a durable one is another matter entirely.
Summary:
Source: S&P Global Ratings credit conditions brief, published ahead of Friday MOU signing
A framework for a US-Iran memorandum of understanding on Hormuz transit was announced June 14, with signing expected FridayS&P says the development is consistent with its existing base case for a gradual second-half 2026 easing, and no forecast changes are being made at this stageOil shipments through the strait are projected to average around three-quarters of pre-war volumes in H2 2026, potentially remaining below pre-war levels into 2027Operational bottlenecks, infrastructure damage, shipping insurance constraints and risk aversion are all cited as headwinds to recoveryS&P warns the agreement’s durability hinges on enforceable safe-passage mechanisms and progress on Iran’s nuclear programme, proxy support and missilesFull updated macroeconomic and credit forecasts are expected within two weeks as part of S&P’s regular quarterly cycle
A framework for restoring transit through the Strait of Hormuz has been announced, with a formal memorandum of understanding between the United States and Iran expected to be signed on Friday. S&P Global Ratings says the development is directionally consistent with its base-case assumption, outlined in May, that disruptions to the critical energy chokepoint would begin easing in the second half of this year.
The ratings agency is not, however, treating the announcement as grounds to revise its economic or credit forecasts. Significant uncertainties remain, and S&P has made clear it will wait for the agreement to be finalised and implementation to begin before reconsidering its baseline projections. Full updated forecasts are expected within two weeks as part of the agency’s regular quarterly credit conditions cycle.
Even under a best-case scenario, the recovery in energy flows through the strait is expected to be gradual. S&P’s May baseline projected that oil shipments in the second half of 2026 would average roughly three-quarters of pre-war volumes, and the agency sees no reason to materially revise that estimate at this point. Damaged infrastructure, shipping insurance constraints, operational bottlenecks accumulated over months of disruption, and persistent risk aversion are all expected to suppress throughput well into 2027.
The agency’s commentary signals that the market’s focus is now shifting from whether the strait reopens to how fully and durably it does so. Without robust enforcement mechanisms, the risk of recurrent flare-ups remains real. Progress on the deeper structural issues behind the conflict, namely Iran’s nuclear programme, its support for regional proxies, and its ballistic missile capabilities, will be necessary before confidence in a sustained resolution is warranted. A tentative truce is a first step; whether it holds is a separate question.
This article was written by Eamonn Sheridan at investinglive.com.