Analysis: The war may be over, but is the uncertainty?

Is the US-Iran war over? We can hope. The Foreign Office (FCDO) revision of its advice against all but essential travel to the UAE and Qatar on Thursday suggests that hope may not be misplaced.

 

That the change in advice came so soon, after so many false starts on a peace deal, was probably the best news for many in the trade since late February. 

 

A 60-day extension of the US-Iranian ‘ceasefire’ already in place for more than two months was finally confirmed by a ‘memo of understanding’ or ‘framework agreement’, signed by President Trump on Wednesday.

 

So, we are finally where Trump told us we were in April.

 

We are told the Strait of Hormuz will reopen and the flow of oil resume, but how fast and under exactly what arrangements remains unclear. 

 

Trump suggested the Strait will be open and “permanently toll free” – meaning a return to how things were before the US and Israel launched the war.

 

But an Iranian state news outlet listed the 14-point agreement in advance of the US doing so, stating the Strait would re-open within 30 days “under Iranian arrangements” and that there would be “a permanent ceasefire on all fronts, including Lebanon”.

 

The point on Lebanon was confirmed by mediator Pakistan and subsequently by a release of the framework agreement text by the White House.

 

More: FCDO relaxes guidance for travel to Gulf region

Israel’s position

However, Israel’s national security minister insisted the agreement “does not bind us in any way”. 

 

That could be a problem, with Israel demonstrating its capacity to wreck any cessation by defying Trump and bombing Lebanon at the weekend.

 

US vice-president JD Vance described the agreement as “very general”, which clearly it is.

 

But the head of the world’s largest tanker operator, Jotaro Tamura of Mitsui OSK Lines, told the Financial Times that any agreement “has to be material, not just simple” before shipping will resume.

 

So, the uncertainty is not wholly over and oil may not flow unrestrictedly through the Strait of Hormuz just yet.

 

Thus far, the industry has withstood the impact of the war on oil supplies and handled the disruption, financial pressures and uncertainty with its usual resilience.

 

The threatened jet fuel shortage has not materialised, largely because the pre-war supply of oil outstripped demand by 3.5 million barrels a day – mitigating the loss of oil through the Strait and ensuring huge stockpiles at the outset. 

 

The beginning of the end?

Demand also shrank, mainly in Asia which accounts for a huge share of the oil market, and the hike in the price of jet fuel – which at one point touched $220 a barrel – ensured refineries increased the amount of kerosene they produced.

 

If this moment marks more a beginning of the end rather than the end itself, it is nonetheless timely as peak summer approaches.

 

The latest monthly Harris Poll UK tracker for Travel Weekly, conducted in late May, showed appetite for booking returning even without an agreement – with 42% of respondents ‘likely’ to travel abroad in the next three months, up from 36% in April.

 

Strikingly, confidence to fly via or stay in the Gulf appeared to be returning. One in four (24%) said they would be ‘comfortable’ to take a holiday in the UAE and 11% ‘very comfortable’, up from 16% ‘comfortable’ in March.

 

Slightly more, 27%, said they would be comfortable to fly via the Gulf, up from 20% in April, even with the advice against all but essential travel in place at that point. 

 

Efforts by Emirates and Etihad to stimulate the market can only help, especially now the Foreign Office has relaxed its advice.

 

The signs are promising, therefore, even if this is only the beginning of an end.

 

The Harris Poll UK surveyed 1,006 UK adults on May 19-26.