Ceasing fire does not change the short-term supply constraints, and energy shocks accelerate the transition towards a turning point.

On April 7, following mediation by Pakistan, Iran and the U.S. reached a two-week temporary ceasefire agreement. Driven by this news, international oil prices plunged by nearly 15%. Brent and WTI crude oil futures fell to around $95 per barrel, with WTI posting its largest single-day drop in nearly six years; risk assets rebounded quickly.

The market’s fierce reaction suggests that the extreme geopolitical risk premium previously embedded in asset prices is rapidly receding. It is important to emphasize that this decline is only a temporary clearing of the risk premium, not a fundamental improvement in the supply-demand fundamentals. The greatest significance of the ceasefire agreement is that it removes near-term “doomsday” risks such as a full-scale war or a blockade of the entire Persian Gulf. However, this does not mean the energy crisis will ease substantially; rather, it places the market into a new phase—a painful period in which supply remains persistently constrained, oil prices continue to fluctuate at high levels, and the risk of physical shortages still lingers.

First, judging from the details of the agreement, there are clear differences between the two sides in their descriptions of the ceasefire conditions. The U.S. emphasized that Iran agreed to open the Strait and that this lays the groundwork for a long-term agreement. Iran, in contrast, emphasized that its proposed 10-point plan would serve as the basis for negotiations and that transit rights through the strait would be incorporated into a sovereignty-and-negotiating-leverage framework.

Second, during the conflict, energy infrastructure in the Gulf region suffered varying degrees of damage, and refining, transportation, and export capacity were all affected. Even if a ceasefire is reached, restoring production will still take time.

In addition, Iran is implementing a system of strait transit fees and permits. Even if the Strait of Hormuz resumes operations, its nature would be closer to a conditional reopening rather than full free passage; shipping companies also tend to remain cautious until safety is verified.

Therefore, purely from a physical standpoint, this round of energy shock is unlikely to see a substantial easing just with a short-term ceasefire. At present, the global energy shortfall is still greater than the combined total of the three energy shocks in 1973, 1979, and 2022. If the strait blockade persists, the shortage of crude oil and refined products in April will reach twice that of March. Uncertainty around supply recovery means the risk of a “black April” in the global energy market has not disappeared—it has merely shifted from an extreme supply-disruption scenario to one with high-frequency disruptions. In this context, the downside room for oil prices will be constrained by supply, while volatility will remain elevated.

But what is worth noting is that energy shocks not only bring significant short-term risks, they are also reshaping the long-term energy landscape. Historical experience has shown that every energy crisis is often an important catalyst for energy technology substitution.