A U.S.-Iran memorandum of understanding is being framed as an end to overt hostilities and as the route to reopening the Strait of Hormuz. But the practical question for drivers—when gas prices finally ease—depends on how quickly ship traffic returns and how l
The question isn’t just whether the war is over. It’s what happens next to the price people pay at the pump.
After Iran’s near-closure of the Strait of Hormuz and attacks on Middle Eastern adversaries. oil and energy markets across the world absorbed shocks in ways that went well beyond simple crude supply. Even in the U.S. the impact has been felt as gasoline prices rose—without the kind of runaway surge many analysts feared—while inventories were drained and shipping routes were thrown off.
Now, a memorandum of understanding between the U.S. and Iran is being treated as a turning point. The deal is also the centerpiece of a political argument about “victories. ” including the claim that Iran reopening the Strait of Hormuz was a major win. But for the people most exposed to the costs. the real benchmark is how quickly flows of goods and energy can snap back toward something approaching normal.
Gregory Brew, a senior analyst on Iran and oil at the Eurasia Group, lays out a practical way to judge the agreement: it needs to do two things—end the war and reopen the strait.
On the first requirement, Brew says the framing from both sides matters. Americans and Iranians are describing this as ending the war, but not the continuing U.S.-Iran confrontation. The hostilities would be overtly wound down as a result of the deal, even if the broader hostility remains.
On the second requirement, the question is money and mechanics—how Iran gets enough economic incentive to comply with reopening. Brew says the MOU appears to address that through several levers.
Iran is set to receive some amount of funds unfrozen in overseas accounts. though the exact figure is unclear; Brew estimates it is between $10 and $20 billion. The deal also appears to include a sanctions waiver that would allow Iran to export oil at market prices for a period of time. Brew adds that Iran expects the U.S. to end its blockade that has been in place since April. and he points to a fresh sign that the process is already moving: it has been reported that several Iranian oil tankers have exited the Persian Gulf and are carrying their oil east toward China.
For Brew, the tangible benefit Iran draws isn’t only the incentives on paper. It’s what the war demonstrated: Iran’s ability to close the strait and keep it closed even amid withering aerial bombardment by both the U.S. and Israel. He argues that is leverage no one can take away.
The agreement may also mention issues like Iran’s nuclear program, the possibility of broader sanctions relief, and the conclusion to the conflict in Lebanon—but Brew says those are likely to be deferred to later rounds of negotiation.
That delay matters because reopening the strait doesn’t automatically mean prices fall overnight.
Brew believes the actual reopening will happen fairly quickly. Within a month, he expects flows to resume to around a third or perhaps half of the prewar level. He ties the faster movement to two practical factors.
First, an international coalition is ready to support movement through the strait. He names the U.K. France. India. and China as having positioned warships in the Sea of Oman prepared to provide security—specifically to sweep mines and keep ships safe as they exit or return to resume the flow of goods.
Second, some volume of shipping has returned to the region. Brew says there are between 50 and 75 empty ships sitting in the Sea of Oman waiting to resume traffic through the strait.
The recovery, he expects, will be phased. There would be an exodus as hundreds of ships that have been trapped in the strait since February move back out into open sea. After that, east-west traffic would resume gradually, with international actors adding more support. Brew says this should facilitate recovery not only of oil flows but also flows of refined products and natural gas.
Still, the region won’t return to normal instantly. He estimates it will take between three and four months for normalcy. citing time needed for regional producers to reverse shut-ins in Iraq and Kuwait. He also points to the scale of shutdowns: virtually all oil production has been shut-in in Saudi Arabia. and in the United Arab Emirates it’s between a third and a half. Reversing those shut-ins will take time and needs to be managed slowly to avoid damaging oil fields.
He expects markets to watch for a rush after ships exit the strait, then to monitor how regional output recovers afterward. Because regional production recovery will lag, prices are likely to stay elevated. In his view, it will take months for output to reach what it was before the war.
That brings the focus back to the U.S.
Brew says the unusual story in this crisis isn’t just how much oil rose—it’s how much it didn’t. Oil went above $100 a barrel, but it stayed mostly below what many analysts predicted. During the war, prices were mostly in the $85 to $110 range.
Now that there is a deal, Brew says oil has been falling rapidly. But he warns the direction of travel depends on whether the deal holds and whether reopening progresses on schedule. If the strait reopens and goods and energy flows recover back to prewar levels. Brew argues that would put downward pressure on prices of goods—including oil.
That doesn’t mean immediate relief for higher prices over the past several months. Even with reopening, he says movement toward lower pricing is possible.
When asked why prices didn’t spike toward $150 or $200, Brew offers four key reasons.
First, China drastically cut its oil imports, from 11 million barrels a day in December to just over 6 million barrels a day in May. That reduced pressure on the global market and freed barrels for other consumers.
Second, strategic and commercial inventories were drained over the last three months, leaving less buffer—but Brew says the market remained relatively sanguine because the inventory draw was expected to be temporary if a deal arrived.
Third, there was demand destruction: between 2 and 3 million barrels a day vanished from the global market. Brew describes it as spread out globally. including reduced jet-fuel demand in Europe. reduced petrochemical production in Southeast Asia. and reduced diesel consumption in South Asia and Southeast Asia. He adds that there was likely demand destruction inside China as well.
Finally, there was a steady stream of tankers that got out of the Strait of Hormuz. Brew says it wasn’t much in absolute terms, but averaged between 2 and 3 million barrels a day on tankers that were either Iranian or national tankers traveling with their AIS transponders off.
All of those forces, he argues, were enough to stabilize the market. But because inventories were being drained so fast, he says it was always going to create pressure for a deal in the short term—before the buffers were reduced and price pressure intensified in July or August.
Brew also returns to China’s role in setting market power. He says market power can come from changing production levels, citing Saudi Arabia as a swing producer able to shift output relatively easily. But he adds that market power can also come from adjusting demand.
He compares what China did to 2022, when the U.S. released a large volume of oil from its Strategic Petroleum Reserve in response to Russia’s invasion of Ukraine. In Brew’s telling, the U.S. used reserves to support demand when it couldn’t adjust supply.
China. he says. did something different: it cut demand dramatically. echoing behavior from the previous year when it imported more oil than it consumed—probably between 1 and 2 million barrels a day above consumption—from places such as Iran and Russia and Venezuela. much of which went into strategic inventories. In the current phase, the opposite move—cutting demand—helped put a ceiling on prices.
So Brew’s takeaway is direct: China demonstrated the ability to affect global oil markets in a way he believes is greater than any other state, including Saudi Arabia and the United States.
As for why U.S. gasoline prices didn’t become calamitous, Brew says domestic gasoline tends to move in lockstep with global crude prices. He points to two U.S. advantages: the United States produces a lot of oil. and it also produces enough refined products to help keep domestic gasoline prices lower.
He also compares Europe. Gasoline prices in Europe, he says, are much higher than they were four months ago, which has contributed to demand destruction there. In the U.S., the increase has been less severe.
Looking ahead, Brew says once the Strait of Hormuz reopens, that should keep prices lower than $120 or $150 a barrel. But he still expects U.S. gasoline to stay above $3.50 cents a gallon—if not higher—because inventories have been drained and because stabilizing the market and restarting regional production will take time.
For drivers, that translates into a blunt reality: relief may come, but not as fast as headlines might suggest.
Brew finishes with a warning embedded in the logic of leverage. Iran now knows it can create this kind of pressure again. In his view. the deal comes together because of what Iran achieved in the strait: the ability to close it gives Iran leverage. and that leverage produced an agreement Brew describes as favorable to Iran and far more favorable than what the United States was willing to offer Iran before the war.
The interview was edited for length and clarity.
Iran U.S.-Iran memorandum of understanding Strait of Hormuz gas prices oil market sanctions waiver shipping Saudi Arabia shut-ins UAE shut-ins Gregory Brew Eurasia Group