The Fragile Ceasefire and the Gulf’s Irreplaceable Energy Role, Why Diversification Has Its Limits
The two-week ceasefire between the United States and Iran, announced on April 8, 2026, offered a glimmer of hope to a world gripped by energy chaos. The closure of the Strait of Hormuz—the maritime chokepoint through which approximately one-fifth of global oil demand flowed during peacetime—had sent energy prices soaring, stranded hundreds of vessels, and disrupted supply chains across the globe. The ceasefire created a narrow window for diplomacy and, potentially, for the resumption of energy exports. Yet, as delegations from the US and Iran met in Islamabad on April 17, the fragility of the truce became increasingly apparent. Israel attacked Lebanon, claiming it was not part of the ceasefire deal. Iran, alleging a violation, again closed the Strait of Hormuz. US President Donald Trump accused Tehran of breaching the agreement. The two-week period for talks, therefore, is not just about striking a lasting peace. It is about ensuring the flow of energy through a waterway that remains, for the foreseeable future, irreplaceable.
Even if the ceasefire holds, restarting and stabilising production and exports from the Persian Gulf could take weeks. Hundreds of tankers are stranded on either side of the Strait, creating a maritime traffic jam. Production across oil and gas fields, refineries, and LNG plants has been reduced or shut down. Restarting these facilities is not a matter of flipping a switch; it requires time, technical expertise, and coordination among multiple parties. And even in the long term, the idea that countries hit by the blockade could simply replace Gulf supplies with oil from the United States or Venezuela is a fantasy. The Gulf’s unique combination of low production costs, high volumes, and reliable infrastructure cannot be easily replicated. The world remains dependent on the Gulf. The ceasefire is a reminder of that dependence—and of the urgent need to manage it wisely.
The Maritime Traffic Jam: 500 Vessels Stranded
One of the immediate consequences of the Strait’s closure has been the stranding of approximately 500 tankers and gas carriers on either side of the waterway. These vessels, carrying crude oil, liquefied natural gas (LNG), liquefied petroleum gas (LPG), and refined products, have been unable to transit. Their crews have been waiting for weeks, uncertain when they will be allowed to leave. Their owners have been incurring massive demurrage costs. Their customers have been facing supply shortages.
Even if the ceasefire holds and the Strait is reopened, the resumption of normal traffic will not be instantaneous. The stranded vessels will need to be sequenced through the narrow passage—at its narrowest point, the Strait is only 21 kilometres wide. This will create a maritime traffic jam, with vessels queuing for days or weeks to transit. Moreover, many of these vessels have been sitting idle for extended periods, which can lead to technical issues: engines that need restarting, pumps that need recalibrating, safety systems that need checking. The backlog will take time to clear.
Restarting Production: Not a Light Switch
Beyond the vessel traffic jam lies an even more complex challenge: restarting production. Across the Persian Gulf region, oil and gas fields, refineries, and LNG plants have had their production reduced or, in many cases, completely shut down. Some facilities may have been damaged in the conflict. Others may have been intentionally shut down for safety reasons. Restarting them is not a matter of flipping a switch.
Oil and gas production is a continuous process that requires careful management of reservoir pressure, wellhead controls, and surface facilities. Shutting down a field can lead to a permanent loss of production if reservoirs are damaged. Restarting requires gradual ramp-up, testing of equipment, and coordination with downstream facilities. Refineries, similarly, cannot be restarted instantly; they require days or weeks to bring process units back online safely. LNG plants are particularly complex, as they involve cryogenic processes that cannot be quickly resumed.
Ajay Singh, an energy and shipping executive with considerable experience in West Asia, notes that “restarting and stabilising production and exports will take several days, possibly weeks.” Even under the best-case scenario—a lasting ceasefire, full cooperation from all parties, and no further damage to facilities—the resumption of normal export volumes will be a gradual process, not an instantaneous event.
The Two-Week Timeframe: More Military Than Economic
The two-week ceasefire period was never intended to be sufficient for a major and reliable restoration of global oil and gas supply. As Singh explains, the main considerations behind that timeframe are military and negotiation-related, not economic. During these two weeks, the parties are supposed to negotiate a more lasting settlement. Combatants remain positioned to resume fighting. Merchant ships will be reluctant to re-enter the Gulf until they have confidence that the ceasefire will hold and that safe passage is guaranteed.
For consumer countries, the main relief from the ceasefire lies not in the immediate resumption of supply, but in the hope that a diplomatic solution can be found before the two weeks expire. The oil price, which has been volatile throughout the crisis, will remain elevated until the parties either agree to a settlement or at least stand down from active hostilities. The two-week window is a pause, not a solution.
The Irreplaceable Gulf: Why US and Venezuelan Oil Cannot Fill the Gap
A view has been expressed—particularly in US policy circles—that countries hit by the blockade could simply buy American and Venezuelan oil instead. This is a dangerous illusion. Singh is categorical: “Even in the long term, it is unlikely that the US and Venezuela can substantially displace the Gulf as a source.”
Consider the numbers. The blockade of the Strait of Hormuz has choked off perhaps 15 million barrels of oil supply per day. That is more than the total current US production of crude oil, which in any case is mostly consumed internally. The US is a net exporter, but its export volumes are limited by infrastructure constraints and long-term contractual commitments. Moreover, US oil is largely light, sweet crude, while many Asian refineries are configured to process the heavier, sour crudes that dominate Gulf production.
Venezuela, despite having the world’s largest proven oil reserves, is not a reliable alternative. Its crude is heavy, sour, and expensive to produce. The country’s oil industry has been in decline for years due to mismanagement, lack of investment, and US sanctions. Even if sanctions were lifted, rebuilding Venezuela’s production capacity would take years and billions of dollars. As Singh notes, Venezuela “has a poor record as a reliable producer.”
The situation is even worse for natural gas. The blockade has shut in approximately 90 million tonnes per annum of Qatari and Emirati LNG exports—a massive volume. Most current US LNG production is already committed for export on a long-term basis under contracts signed years ago. New export capacity coming online in the US and elsewhere in the coming months will make up for less than half of the choked-off volume. The gap cannot be filled quickly or easily.
The Cost Advantage: Why the Gulf Will Always Win
Beyond the volume constraints, there is a fundamental economic reality: the Gulf region has the lowest cost of oil and gas production in the world. Saudi Arabian crude can be produced for less than $10 per barrel. Qatari LNG is among the cheapest to produce globally. Even after adding transportation costs, Gulf supplies are cheaper than virtually any alternative.
This cost advantage is not temporary; it is structural, based on geology and scale. The Gulf’s oil fields are giant, shallow, and easy to produce. Its gas fields are massive and concentrated. No other region can match these characteristics. The US, with its shale revolution, has become a major producer, but shale wells decline rapidly and require continuous drilling, making them more expensive and less reliable. Venezuela’s heavy oil requires expensive upgrading. Deepwater production in Brazil or West Africa is capital-intensive.
Diversification of supply sources is a prudent strategy for energy-importing countries like India, Japan, China, and South Korea. But diversification does not mean replacement. It means reducing dependence on any single source, not eliminating dependence on a region that is uniquely endowed. As Singh notes, “Diversification of supply sources dictates continuing to buy substantial volumes from there.”
The Toll Question: A Political Minefield
Amid the crisis, reports have emerged that Iran is proposing to impose a toll or transit fee on vessels crossing the Strait of Hormuz. The reported fee would be equivalent to approximately $1 per barrel of crude oil—not economically unviable, but politically explosive.
Unlike the Suez Canal and the Panama Canal, which are human-made assets built within the territories of Egypt and Panama respectively, straits are natural waterways, and there is generally no toll charged for transit through them. There is an exception in the case of the Bosphorus and the Dardanelles—straits that lie within the territory of Turkey—where a special international treaty, the Montreux Convention, allows Turkey to levy a toll. But that is a historical exception, not a precedent.
Singh suggests that such an arrangement could be worked out for the Strait of Hormuz, but only through a broad agreement among the affected countries—major petroleum suppliers and buyer nations—and in exchange for enforceable guarantees that transit would not be interfered with in the future. However, even then, such a change “could set a problematic precedent where all manner of settled matters are opened up by countries.” The law of the sea, long established under the United Nations Convention on the Law of the Sea (UNCLOS), provides for free transit passage through international straits. Unilaterally imposing a toll would be a violation of that principle, and would be challenged by the international community.
The Way Forward: Managing Dependence, Not Eliminating It
The crisis in the Strait of Hormuz has exposed the world’s continued dependence on the Persian Gulf for its energy needs. Despite decades of talk about diversification, despite the shale revolution in the United States, despite the growth of renewable energy, the Gulf remains irreplaceable. Its low-cost, high-volume production is a unique asset that cannot be replicated elsewhere.
For energy-importing countries, the lesson is not that they should try to eliminate their dependence on the Gulf—that would be impossible and economically irrational. The lesson is that they must manage that dependence more wisely. This means:
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Building strategic petroleum reserves to cushion against short-term disruptions.
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Diversifying supply sources to reduce concentration risk, even if the Gulf remains the largest supplier.
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Investing in renewable energy and energy efficiency to reduce overall dependence on fossil fuels.
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Strengthening diplomatic engagement with Gulf producers and with the regional powers that control the chokepoints.
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Supporting the rules-based international order that guarantees freedom of navigation, including through UNCLOS.
The ceasefire is fragile. The negotiations in Islamabad are uncertain. But even under the best-case scenario—a lasting peace, a fully reopened Strait—the world will remain dependent on the Gulf. That is a fact of economic geography. The task of policymakers is not to pretend otherwise, but to manage that dependence with clarity, prudence, and foresight.
Q&A: The Gulf’s Irreplaceable Role in Global Energy
Q1: How many vessels are currently stranded due to the closure of the Strait of Hormuz, and what challenges will they face when the Strait reopens?
A1: Approximately 500 tankers and gas carriers are stranded on either side of the Strait of Hormuz. When the Strait reopens, they will face a maritime traffic jam as they are sequenced through the narrow passage (only 21 kilometres wide at its narrowest point). Additionally, many vessels have been sitting idle for extended periods, leading to potential technical issues (engines needing restarting, pumps needing recalibration, safety systems needing checking). The backlog will take days or even weeks to clear, meaning that even under the best-case scenario, the resumption of normal shipping volumes will not be instantaneous.
Q2: Why is restarting oil and gas production in the Gulf not as simple as “flipping a switch”?
A2: Production across oil and gas fields, refineries, and LNG plants has been reduced or shut down. Restarting is a complex process:
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Oil and gas fields: Shutting down can damage reservoirs; restarting requires gradual ramp-up, testing of equipment, and coordination with downstream facilities.
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Refineries: They cannot be restarted instantly; they require days or weeks to bring process units back online safely.
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LNG plants: Particularly complex due to cryogenic processes that cannot be quickly resumed.
As Ajay Singh notes, “restarting and stabilising production and exports will take several days, possibly weeks.”
Q3: Why can’t the United States and Venezuela simply replace the Gulf as a supply source?
A3: The blockade has choked off approximately 15 million barrels of oil supply per day—more than total current US production, which is mostly consumed internally. US export volumes are limited by infrastructure and long-term contracts. Venezuelan crude is heavy, sour, expensive to produce, and the country has “a poor record as a reliable producer.” For natural gas, the blockade has shut in 90 million tonnes per annum of Qatari and Emirati LNG exports. Most US LNG production is already committed under long-term contracts; new capacity will make up for less than half of the choked-off volume. Even in the long term, the Gulf’s unique combination of low production costs, high volumes, and reliable infrastructure cannot be replicated.
Q4: What is the proposed toll for transiting the Strait of Hormuz, and what are the legal and political implications?
A4: Reports suggest Iran is proposing a toll equivalent to approximately $1 per barrel of crude oil—not economically unviable, but politically explosive. Unlike human-made canals (Suez, Panama), straits are natural waterways where tolls are generally not charged. An exception exists for the Bosphorus and Dardanelles (Turkey) under the Montreux Convention, a special international treaty. Such an arrangement could theoretically be worked out for Hormuz, but only through a broad international agreement with enforceable guarantees of free transit. However, this would “set a problematic precedent where all manner of settled matters are opened up by countries” and would challenge the UNCLOS principle of free transit passage through international straits.
Q5: What lessons should energy-importing countries like India learn from this crisis?
A5: The crisis demonstrates that the Gulf remains irreplaceable due to its unique low-cost, high-volume production. The lesson is not to eliminate dependence (impossible and economically irrational) but to manage it wisely. Recommendations include:
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Building strategic petroleum reserves to cushion short-term disruptions.
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Diversifying supply sources to reduce concentration risk (even if the Gulf remains the largest supplier).
-
Investing in renewable energy and energy efficiency to reduce overall fossil fuel dependence.
-
Strengthening diplomatic engagement with Gulf producers and regional powers controlling chokepoints.
-
Supporting the rules-based international order (UNCLOS) that guarantees freedom of navigation.
The task is not to pretend dependence can be eliminated, but to manage it with clarity, prudence, and foresight.
