Overnight, the US President announced a two-week ceasefire with Iran. Markets naturally welcomed the news, even though the circumstances leading to this agreement were brutal. Between Iranian strikes on strategic sites in the Middle East, mounting delivery delays, and the return of energy inflation, it is still too early to declare victory.
Yet that is precisely what Trump did, proclaiming a "total and complete" victory. It should be noted, however, that the agreement currently only covers a suspension of hostilities in the region for two weeks. Peace talks are set to begin, although tensions are already surfacing just hours after the announcement. Israel maintains that Lebanon is excluded from the ceasefire, a position that contradicts statements from Pakistan, the mediator in this matter. In this uncertain context, the question of economic reconstruction remains unresolved, even as the reopening of the Strait of Hormuz appears to be taking shape.
Persistent Inflation
Following the announcement, Brent crude prices slumped almost 10%, trading at around $95, compared with $110 just 24 hours earlier. This decline, however, does not guarantee an immediate reduction in energy bills for everyone. Many operators, particularly fuel suppliers, entered into futures contracts at the height of the conflict at levels well above $100. Pump prices may retreat slightly in the coming weeks, although the market will take time to find its equilibrium.
The price adjustment mechanism remains asymmetrical: an increase is passed through in one or two weeks, while a decrease is generally much slower. According to INC research, between 2014 and 2015, despite a 50% collapse in Brent from $82 to $41, diesel and SP98 (lead free) prices in France fell by only 16% and 18%, respectively. Conversely, during the 2016-2017 recovery, a 12% rise in crude led to an 11% jump in diesel and a 5% increase in SP98. This inertia is even more pronounced as supply difficulties have yet to be resolved.
Accumulating Charges
Maritime logistics relies on a simple principle: ships must keep moving. The loading-unloading cycle holds as long as vessels do not remain stuck in ports. Furthermore, there is less capacity in ports than there are ships in circulation. Waiting offshore to berth does not just paralyze supply chains; it also carries a significant cost for companies. Added to the charges related to downtime is a multitude of expenses incurred when restarting operations.
According to Bloomberg, nearly 800 ships, some of which are fully loaded, were still blocked in the Strait on April 7. Their simultaneous departure upon reopening risks clogging port infrastructure at the destination. To compensate for soaring risks and operating costs, some carriers are already imposing surcharges on shippers. At CMA CGM, these reach $3,000 per 40-foot dry container and $4,000 for refrigerated containers or specialized equipment. Despite persistent supply lead times, these extra costs will also be passed on to the end consumer.
Ships Move Slowly
Indeed: the majority of the fleet sails at an average of around 25 km/h. This is a choice dictated by safety, not speed. The traditional route between Hormuz and Europe via the Suez Canal takes about 20 days, including one day to organize convoys in the canal. In other words, even if the Strait reopens immediately and without restrictions, it will still take more than two weeks for goods leaving the area to arrive in Europe.
Added to this is the fact that the Suez Canal, which was gradually recovering its traffic thanks to the lull in the Israeli-Palestinian conflict, is once again being avoided by shipping giants who fear a resumption of piracy operations. The alternative is to bypass Africa via the Cape of Good Hope, a detour that adds approximately 12 days of navigation. This further extends lead times for Europe.
Maritime transport between the Middle East, Asia, and Europe continues to grow more complex, and decades of stability are few and far between. The air freight alternative is increasingly attractive to shippers, but it also has its limits. One thing is certain: the resumption of traffic via Hormuz remains a top priority for the White House, and the progress of negotiations will once again serve as the primary compass for investors.
