These disturbances are unlikely to abate; The ceasefire agreement reached by President Donald Trump with Iran is only a general framework that postpones the difficult details until a later time.
Trump is focusing on reopening the Strait of Hormuz, the shipping gateway through which about 20% of global oil production passes, as quickly as possible to lower gasoline prices and calm inflation before the midterm elections in November.
Reaching a comprehensive agreement with Iran will be extremely difficult, so it should not be ruled out that extending the sixty-day deadline allocated to resolve these details, especially with regard to Iran giving up its stock of enriched uranium, and the extension may continue until election day.
Trump has a short window of time to restore the flow of oil from the waters of the Arabian Gulf, which is the main factor in reducing the prices of standard Brent crude, which jumped from about $60 per barrel at the beginning of the year to more than $100 after the United States began bombing Iran in coordination with Israel at the end of February.
Despite the intense American attack, the Iranian Revolutionary Guard proved that it can easily disrupt the movement of ships using mines and speedboats armed with missiles. During a frustrating period, Iranian-backed oil ships were passing through the strait, while all other ships remained stuck in port. Trump responded by completely stopping the movement of ships in the waters of the Arabian Gulf, which imposed additional financial pressure on Iran, but further choked the oil market. Inflation and transportation costs
The rise in gasoline prices since the outbreak of war had the most direct and immediate impact on Americans, making it, whether rightly or not, a measure of the state of the economy. Another immediate impact came from transportation costs, which also increased inflation pressures, as the annual inflation rate jumped in May to 4.2%, from 2.4% in January.
Unfortunately, the memorandum of understanding signed by Trump and Iran does not give companies that transport goods by sea, land and rail much clarity about the near future.
Transportation companies have long recognized that their thin profit margins cannot absorb sudden increases in fuel prices. Therefore, the shipping sector, whether in air freight, sea transport, trains or trucks, has adopted fuel surcharges to pass on higher energy costs to freight shipping companies. These companies, most of whom are retailers, manufacturers and distributors, must then choose between bearing the impact of higher shipping costs or passing it on to the consumer.
Fuel surcharges are expected to begin to decline if the ceasefire holds and the Strait of Hormuz is fully reopened to ship traffic, although it is unclear how quickly oil flows will return to normal.
Balancing supply and demand will remain closer to a guessing game, as Gulf oil producers seek to release the crude they were forced to store, in conjunction with countries trying to refill their strategic reserves. The global supply of oil is expected to decline by 3.9 million barrels per day, to an average of 102.4 million barrels per day this year, even with the ceasefire, according to a report issued by the International Energy Agency. Production is also expected to recover by 8 million barrels per day in 2027.
Sea freight rates
As crude oil prices decline, container shipping rates by sea should also decline, but this path also entails complications. The freight rate on the standard Shanghai to Los Angeles route has more than doubled since February, to $5,142 per container, according to Drewry.
Many shippers moved forward transport dates for peak season goods and back-to-school supplies due to geopolitical uncertainty. This early shipping, in addition to the stranded transport capacities in the waters of the Arabian Gulf, where about 500 ships are still stuck inside it, concealed the fact that the maritime transport sector is still suffering from an excess of carrying capacity.
With an agreement to reopen the Strait of Hormuz, those in the logistics sector may consider waiting until sea freight rates fall later this summer.
As for broader inflation, it may already be too late. Prices may not fall quickly in light of a feverish rush to build up stocks of commodities and oil before a new wave of unrest erupts.
This ceasefire is only a temporary truce suitable for both parties, while the conflict between the United States and Iran is still far from being settled. Gulf countries should continue investing in alternative routes for transporting goods and oil, while the shipping sector will have to prepare for further global turmoil.
