Stephen Apolima | April 1, 2026
The promise of swift energy relief has become a central pillar of President Trump’s public messaging. His assertion that oil and gas prices will plummet once hostilities with Iran end within two to three weeks appeals to a psychologically satisfying concept—the “Peace Dividend.” In theory, removing the geopolitical risk premium from the world’s most critical energy artery should trigger an immediate and dramatic market correction. In practice, however, the numbers emerging from global commodity desks, insurance markets, and infrastructure assessments tell a far more complicated story.
A structural review of the current energy landscape reveals that while a ceasefire may calm trading floors, it cannot immediately resolve the deep-seated physical and institutional disruptions now embedded in the global supply chain.
The Scale of the Disruption: How the War Drove Crude Oil Up 42% and Diesel to a 45% Premium
Before any analysis of a recovery, the magnitude of the current crisis must be properly established. Before the war began, benchmark U.S. crude prices hovered in the low- to mid-$60 per barrel range. Since hostilities commenced, prices surged to hover near $95 per barrel—a rise of roughly 42% in crude alone—before global oil prices climbed further to nearly $120 a barrel at their peak, their highest level since 2022, as the effective halting of shipments through the Strait of Hormuz took hold.
The pump-level impact has been equally severe. Average U.S. gas prices topped $4 per gallon on March 31 for the first time since 2022, with the average price rising 48 cents per gallon in just the first week of hostilities. The sharpest retail blow has fallen on diesel—the lifeblood of the freight, farming, and construction sectors—which hit $5.45 per gallon, a 45% increase since the start of the war. Because diesel underpins the cost of moving virtually every physical good in the American economy, its price surge functions as a broad-based inflation multiplier, not merely a fuel surcharge.
The damage has not been confined to American motorists. European energy markets have sustained parallel devastation: Dutch TTF natural gas benchmarks nearly doubled to over €60/MWh by mid-March, as the conflict coincided with European gas storage levels estimated at just 30% capacity following a harsh 2025–2026 winter. The head of the International Energy Agency described the overall situation as the “greatest global energy security challenge in history”—a characterisation that, measured against the data, is difficult to dispute.
- Market Sentiment Versus Physical Capacity
There is a critical distinction in energy economics between speculative risk and operational capacity. When peace negotiations commence, oil futures often drop sharply as speculators unwind bets on a total supply collapse. This creates an immediate, visible dip on global exchanges—and it is precisely this dip that the administration is, in essence, promising American consumers.
If the war ends, a massive market sell-off could cause the price of oil futures to plummet on paper. But it would still take time for the volume of oil flowing out of the Middle East to ramp back up, in part because oil producers will need to turn their wells back on, damaged infrastructure will require inspection and repair, and supply chains disrupted over weeks cannot be reconstituted overnight.
The physical reality is governed by infrastructure, not diplomacy. Iranian forces have targeted regional energy infrastructure, including refineries and terminals, forcing shutdowns—with some operations badly damaged and in need of extended repairs. Qatar declared force majeure on its enormous volumes of gas exports after Iranian drone attacks, and analysts estimate it may take at least a month to return to normal production levels. Saudi Aramco’s mammoth Ras Tanura refinery and crude export terminal closed due to attacks, with no immediate timeline for resumption.
Before the war, Iran produced around 3.5 million barrels per day of crude oil, amounting to approximately 4% of global oil supply. The Strait of Hormuz served as the conduit for nearly 20 million barrels per day of global oil production, with Saudi Arabia, Iraq, and the UAE together exporting 13.1 million barrels per day through the strait. The destruction of processing and export facilities in this corridor is measured in years of reconstruction, not days of diplomacy.
- The Institutionalisation of the “Hormuz Transit Fee”
Perhaps the single most consequential structural change wrought by this conflict is the formal transformation of one of the world’s great international waterways into what maritime analysts now openly call a “toll booth.”
Since mid-March, Iran has rerouted ships from the normal, well-demarcated two-way lane to an alternate path close to the Iranian coastline, between the islands of Qeshm and Larak. The Islamic Revolutionary Guard Corps checks ships’ nationality, ownership, cargo, and crew and, if it grants permission, allows passage. Some vessels have had to pay for the privilege—with estimated tolls of up to $2 million per transit, according to Lloyd’s List Intelligence and Bloomberg.
This is not an improvised wartime measure. The Iranian parliament is actively working on a draft bill to formally impose fees on vessels seeking safe passage through the Strait of Hormuz, which would legally enshrine Iran’s oversight of the waterway in domestic law. Turning the strait into a Suez Canal-style revenue mechanism has, by multiple accounts, become one of Iran’s explicit demands in preliminary talks with the United States.
This functions as a permanent tariff on every barrel of oil originating in the Persian Gulf. Even if active hostilities ceased tomorrow, if the toll structure remains—codified under Iranian domestic law—the base cost of energy stays elevated. This shifts the challenge from “ending a war” to the far more complex task of dismantling a new sovereign revenue mechanism and restoring the historical norms of Freedom of Navigation under the UN Convention on the Law of the Sea.
- The Maritime Insurance Floor: The Hidden Tax That Lingers
The maritime insurance market may be the most structurally significant—and least publicly understood—barrier to a post-war price collapse. Insurers operate on long-term actuarial data, not political cycles or presidential timelines.
Before hostilities began, the market operated within predictable bounds. The typical war-risk rate for Strait of Hormuz transits was 0.15% to 0.25% of hull value for a one-week policy, according to Lloyd’s List finance editor David Osler. Since the conflict began, quotes have risen to as high as 5% to 10% of hull value—a 20- to 40-fold increase. For a very large crude carrier worth around $100 million, that translates to several million dollars in additional costs for a single transit.
The cascading effects have already reached consumers directly. Shipping giant Hapag-Lloyd implemented a War Risk Surcharge of up to $3,500 per container as of March 2, 2026. Major Protection & Indemnity clubs—including Gard, Skuld, and NorthStandard—issued formal cancellation notices for the Persian Gulf, with additional premiums spiking from 0.2% of vessel value to over 1.0% in just 48 hours. For a typical LNG carrier with a hull value of $150 million, this adds $1.5 million in insurance costs for a single voyage.
War Risk premiums rise instantly at the outbreak of conflict but descend slowly. Insurers require a sustained period—typically six to eighteen months—of incident-free transit before reducing rates to pre-conflict levels. As long as these premiums remain elevated, the cost of moving oil stays inflated by millions of dollars per voyage, creating a structural price floor that prevents retail fuel costs from returning to previous lows regardless of what a peace agreement stipulates.
- The Strait in Numbers: A Near-Total Shutdown
The physical scale of the Hormuz disruption defies easy summary. Daily transits through the strait have fallen 90% to 95% since the conflict began, according to shipping intelligence firm Kpler, with hundreds of tankers trapped inside the Persian Gulf. The international Brent crude oil benchmark has reflected this reality in real time, topping $114 a barrel as the accumulated impact of millions of barrels of lost crude shipments has begun to be felt by a global economy that consumes more than 100 million barrels daily.
Goldman Sachs has offered precise quantification of the risk calculus: traders are currently demanding approximately $14 more per barrel to compensate for increased risks—roughly corresponding to the estimated effect of a full four-week halt in flows through the strait, with spare pipeline capacity used as a partial offset. Should Kharg Island, Iran’s key oil export hub, sustain significant damage, analysts speaking to Reuters have estimated Brent could reach $120 per barrel, with some projections extending as high as $200.
- Domestic Refining and the Downstream Bottleneck
Even if Middle Eastern stability were perfectly restored overnight, American consumers would face a domestic industrial constraint that no foreign-policy signature can resolve. The United States is a global leader in crude oil production, but crude is a raw material that cannot be pumped directly into vehicles.
The cheapest U.S. natural gas basins are pipeline-constrained, meaning any new incremental supply must come from deeper and more expensive formations—with breakeven costs nearly double those of more accessible basins, according to Chatham House. U.S. domestic natural gas prices were already projected to be 60% higher in 2026 than in 2024, before any war premium was factored in.
The domestic refining system is operating near maximum capacity, and no major new refineries have been built in the United States in decades. Without significant investment in downstream infrastructure, increased drilling produces only a glut of raw crude that cannot be processed into gasoline quickly enough to substantially lower prices at the pump. The bottleneck is not in the ground; it is in the factory.
The Verdict: A Transition to “High-Floor Stability”
The optimism regarding a post-war price drop is psychologically understandable and not entirely without basis. A cessation of hostilities will end the extreme volatility and prevent the panic spikes that pose the most acute threats to global economic stability. As EY-Parthenon chief economist Gregory Daco has observed, “the longer this lasts, the more significant the shock would be”—which implies, by logical inversion, that ending it promptly does carry real economic value.
However, a return to the pre-war energy era is constrained by three structural anchors that no peace deal automatically dissolves:
Infrastructure Scars: The time and specialised capacity required to repair damaged Gulf refineries, LNG processing trains, and export terminals. Qatar alone may require a month or more simply to restore force majeure-affected gas exports, and the broader regional picture is considerably more complex.
Institutional Costs: The lasting impact of war risk insurance premiums—which have risen 20 to 40 times pre-war levels—and the new Hormuz Transit Fee regime, which Iran is now seeking to enshrine in domestic law as a permanent revenue stream.
Refining Limits: The domestic U.S. inability to process significantly more crude without major industrial investment, a structural constraint that predates this conflict entirely and is unaffected by its resolution.
The U.S. Energy Information Administration’s March 2026 short-term outlook projected that Brent crude would remain above $95 per barrel for at least the next two months, before declining below $80 in the third quarter and ending the year around $70—projections that themselves rest on optimistic assumptions about a Hormuz reopening and no further escalation.
While the “War Premium” may vanish with a ceasefire signature, the “Infrastructure and Institutional Premiums” are now embedded in the physical and legal architecture of the post-war order. The United States and the world are not headed back to the cheap energy era of the early 2020s, but rather toward a period of High-Floor Stability: the wild swings of open conflict may end, but the base cost of energy will remain structurally elevated for the foreseeable future—a reality that no two-to-three-week timeline, however optimistically drawn, can wish away.
Sources: Center for American Progress; Goldman Sachs Global Commodities Research; Center for Strategic and International Studies; Chatham House; Al Jazeera; PBS NewsHour; Time; CBS News; Foreign Policy; Bloomberg; Euronews; Lloyd’s List Intelligence; U.S. Energy Information Administration (March 2026 Short-Term Outlook); Resources for the Future.
