The United States and Iran have announced a peace agreement aimed at ending the conflict and reopening the Strait of Hormuz, a critical global energy transit route, raising expectations of improved energy supplies and lower commodity prices worldwide.

According to officials from both countries, a memorandum of understanding is scheduled to be signed in Switzerland on June 19. The announcement triggered a decline in oil prices as markets anticipated the restoration of disrupted crude and gas flows through the strategically important waterway.

Industry experts cautioned that while the reopening of the Strait of Hormuz is a significant development, the normalization of global energy supplies will be gradual. Prashant Vasisht, Vice President and Co-Head of Corporate Ratings at ICRA, stated that crude oil and natural gas prices could ease if vessel traffic through the strait returns to normal. However, he noted that supply normalization may take at least two quarters and could extend up to a year.

Analysts estimate that nearly 10-11 million barrels per day of oil production in West Asia was shut during the conflict, while some production and export facilities suffered physical damage. As a result, energy prices may remain above pre-war levels for several months despite the peace agreement.

The details of the agreement remain undisclosed, though the announcement highlighted the end of hostilities and the reopening of the Strait of Hormuz. Iran has also been seeking relief from international sanctions, and any easing of restrictions on Iranian crude exports could benefit major importers such as India.

For India, the reopening of the Strait of Hormuz carries significant implications. Prior to the conflict, around 50 percent of India's crude oil imports and a substantial share of its LPG imports passed through the route. The disruption had raised concerns over energy security, particularly as India imports nearly 88 percent of its crude oil requirements.

The conflict led to a sharp increase in India's oil import costs, with the average crude import price rising above $106 per barrel in May. India's oil import bill also surged significantly as global crude prices remained elevated during the period of hostilities.

The conflict additionally impacted liquefied natural gas supplies from Qatar after military action affected energy infrastructure in the region. However, analysts believe India's LNG imports from Qatar could recover relatively quickly because key gas export facilities remained largely intact.

Experts noted that the reopening of the Strait of Hormuz is expected to reduce pressure on oil, LNG and LPG supplies, support the Indian rupee, ease inflationary risks and provide a positive backdrop for economic growth. They also emphasized the need for India to strengthen strategic energy inventories, expand domestic production and diversify import sources to reduce vulnerability to future geopolitical disruptions.

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