The recent peace agreement between the United States and Iran has boosted sentiment across global financial markets, but analysts caution that the impact on crude oil prices may be less immediate. While the easing of geopolitical tensions reduces supply risks, structural challenges in restoring production and replenishing depleted oil inventories are likely to keep oil prices elevated in the coming months.

During the conflict, global oil inventories, including both commercial and strategic reserves, reportedly declined to their lowest levels since 2003. Countries such as the United States, China, and several European nations relied on strategic petroleum reserves to offset supply disruptions and contain the surge in crude prices.

According to Bhavil Patel of Tradebulls Securities, the United States may have utilized approximately 66 million barrels from its strategic reserves, representing nearly 16-17 percent of its total stockpile. While China does not officially disclose reserve data, estimates suggest it may have drawn down around 20-22 percent of its reserves, based on significantly lower crude imports during March and April.

In response to the conflict, around 30 member countries of the International Energy Agency coordinated reserve releases of up to 400 million barrels. Reports indicate that approximately 133 million barrels had already been released or loaned by early June, reducing stockpiles across multiple nations.

Analysts note that replenishing these reserves is unlikely to happen immediately. Governments typically wait for oil prices to stabilize before increasing purchases to avoid creating additional supply-demand imbalances. Historical trends also suggest that rebuilding inventories is a lengthy process. Following the Russia-Ukraine conflict, the United States took nearly two years to replenish around 40 million barrels of reserves. At a similar pace, restoring the recently depleted volumes could take several years.

Beyond inventory concerns, damage to energy infrastructure across the Middle East remains a key challenge. Ports, refineries, storage facilities, and production assets affected during the conflict require substantial repair and operational testing before returning to full capacity. The International Energy Agency has reported that more than 8 million barrels per day of oil production capacity was impacted across the region during the conflict.

Patel stated that reopening the Strait of Hormuz alone will not immediately restore normal oil flows. Shipping congestion, damaged infrastructure, and refinery outages may take two to three months to resolve fully. He expects crude oil prices to remain around $85 per barrel over the medium term.

Dhaval Popat of Choice Broking echoed similar concerns, noting that restarting oil production involves more than reopening facilities. Storage levels must be rebuilt, wells need to be reactivated, and reservoir pressures restored after extended shutdowns. As a result, production recovery could take considerable time.

While crude prices may witness an initial decline following the peace agreement, analysts believe supply-side constraints and inventory rebuilding efforts could keep Brent crude elevated. Estimates suggest Brent crude could average around $89 per barrel in FY27, although a faster-than-expected normalization of supply conditions could lower the average closer to $82 per barrel.