What does Trump's "hands-off" approach to the Strait of Hormuz mean for oil prices?

Latest news indicates that both Iran and the U.S. have ended their will to de-escalate the conflict in the Middle East. However, if the war ends, a key question will have to be faced: who will reopen the Strait of Hormuz?

On March 31, local time, U.S. President Donald Trump said at the White House that the U.S. would end its hostilities against Iran within “two to three weeks,” adding that “the hardest part has already been done.” Earlier the same day, he said on social media, “You have to start learning to fight for yourselves; the U.S. won’t help you anymore. Go get your own oil yourselves.”

This statement completely changed the market’s logic for expectations regarding the Strait of Hormuz. Shipping data for the Strait shows that as of March 29, the 7-day average transit volume was only 1.8 million barrels per day, roughly equal to Iran’s crude oil export volume, and it had not materially improved.

Deutsche Bank set four scenarios: if the Strait is reopened in April and Brent crude quickly falls to $90 per barrel, then gradually returns to $75 per barrel as IEА reserves are released. But if the blockade continues until November (two quarters), the average Brent crude price will reach $177 per barrel, with a range of $170 to $190.

U.S. “shifts blame,” reopening the strait remains up in the air

According to a CCTV reporter’s local-time report on March 30, U.S. officials said that Trump told aides that even if the Strait of Hormuz remains largely closed, he is willing to end military operations.

U.S. government officials believe that forcibly reopening the waterway would push military action beyond the original 4-to-6-week timeframe. Based on this, Trump decided to gradually end the current action after achieving key objectives such as weakening Iran’s naval and missile capabilities, and instead push Iran to restore shipping access through diplomatic pressure. If diplomatic means fail, Washington will urge Europe and Gulf allies to take the lead in reopening the strait.

According to Xinhua News Agency, Trump also called out the UK on social media, saying it “refused to participate in striking Iran,” and suggested: “First, buy it from the U.S.—we have plenty; second, have the courage to go to the strait there and抢过来.”

Data shows: Hormuz transit volume has hardly improved

According to the Chase the Wind Trading Desk, in a research report published on March 31, Deutsche Bank analyst Michael Hsueh pointed out that since Trump described Iran’s “benevolent gift” on March 25 (i.e., increasing commercial transit permits), the transit volumes of crude oil and refined products from west to east through the Strait of Hormuz have not risen in a meaningful way.

As of March 29, the 7-day average transit volume was only 1.8 million barrels per day, nearly the same as Iran’s crude oil export volume (about 1.5 million barrels per day).

This means: there is a clear gap between official statements and facts that can be independently verified.

And “a disruption of the strait could last even after the war ends.”

Michael Hsueh believes that Trump’s remarks implicitly ended the threat of U.S. military upgrades targeting Iran’s electricity generation facilities, but could instead allow Iran to control the strait for a long time in a lower-intensity way, using it as political leverage against the Gulf oil-producing countries. Some experts have already described the phrase “ending military operations before the strait is reopened” as “incredibly irresponsible.”

Four scenarios: the highest oil price could reach $177 per barrel

Deutsche Bank constructed four scenarios with the duration of the strait blockade as the core variable:

Scenario One: Reopening in April

Reopening occurs in early April along with the agreement of a ceasefire. Regional crude oil exports are not limited by damage to infrastructure after the strait is reopened. Negotiations between the U.S. and Iran resume, and the sanctions mechanism allows Iran’s crude oil exports to recover to pre-conflict levels.

Brent crude falls quickly to $90 per barrel, then gradually returns to $75 per barrel as the IEA reserves are released.

Scenario Two: Reopening in May

Iran maintains the blockade. Iran insists that the strait is closed. Missiles, drones, fast attack craft, or mini submarines cause damage to merchant ships. The deployment of naval mines remains limited. A small portion of commercial traffic is able to pass through via direct negotiations with Iran. There are no military escort operations. Oil infrastructure is not permanently damaged. A cooling of the situation in April allows shipping capacity to recover in early May.

Brent crude holds in the $100 to $120 per barrel range, and further release of IEA reserves is needed by year-end to normalize oil prices.

Scenario Three: Reopening in June

Iran lays large-scale minefields, extending the blockade. The U.S. is too slow in weakening this capability. Brent crude reaches $130 per barrel, with a range of $130 to $150 per barrel, and in the short term the effect of IEA reserves releases is limited.

Scenario Four: Reopening in November (the most extreme scenario)

A protracted war of attrition; the Houthis intervene and block the Bab el-Mandeb Strait, and Saudi Aramco’s Yanbu port or East-West pipelines are attacked. In the two-quarter blockade period, the average Brent crude price is $177 per barrel, with a range of $170 to $190.

It is worth noting that Deutsche Bank’s survey shows that 64% of respondents expect the strait blockade to end between May and September 2026 (including 25% who expect May, 16% who expect June, and 23% who expect the third quarter).

Reopening the strait: obstacles are far more than expected

U.S. mine-clearing capability is not in place. Deutsche Bank notes that among the U.S. Navy’s three mine-capable littoral combat ships, the “USS Tulsa” and “USS Santa Barbara” were last reported to be docked in Malaysia and Singapore for routine maintenance, while the “Canberra” was located in the Indian Ocean—none can immediately participate in the strait reopening operations.

Iran’s conditions are stringent. Iran has made it clear that it will end the war only after all five of its proposed conditions are met, including closing all U.S. regional bases and receiving security guarantees that it will not be attacked again, etc. These conditions are almost impossible for the U.S. to accept.

According to Xinhua News Agency, on March 31 Iranian President Pezeshkian said Iran has a “necessary willingness” to end the war, provided the other side meets Iran’s demands, especially making the necessary guarantees of non-aggression.

Difficult internal coordination within Iran’s leadership. According to U.S. media on March 30, there are difficulties coordinating within Iran’s leadership, which will further delay the negotiation process and make the strait reopening timeline even more uncertain.

Major divergence on the production restart timeline. Aramco CEO Amin Nasser previously said that restarting production would require only “days rather than weeks”; however, Kuwait Oil Company said last week that restoring output after the war ends requires three to four months. The large gap between the two reflects differences in geological conditions and on-the-ground infrastructure among various oil-producing countries.

IEA reserves: enough for a month—then what?

Data estimates show that the 400 million barrels of reserves from the IEA’s first coordinated release, after taking into account various mitigation factors, could cover the one-month gap from the strait blockade and is expected to support through September to November 2026.

The problem is that if the blockade lasts for two quarters, at a pace of releasing 400 million barrels every two quarters, the total required release would be 2.4 billion barrels. But the IEA’s actual reserves are only 1.8 billion barrels, leaving a gap of about 800 million barrels.

Deutsche Bank believes possible options to cover this gap include: raising production commitment targets by IEA member countries, emergency oil output increases by OPEC after the strait is reopened, and using about 1.2 billion barrels of large-scale reserves.

Houthis: the biggest variable of uncertainty

This week, the Houthis launched missile attacks on Israel, and their level of involvement is the most critical uncertainty.

If the Houthis only block shipping in the Red Sea direction, vessels can reroute through the Suez Canal, at the cost of a longer voyage and less cargo. But if the Saudi-Houthi ceasefire agreement from 2022 breaks down, the Houthis’ missile capabilities would directly threaten Saudi infrastructure.

There are historical precedents: in May 2019, the Houthis attacked Saudi East-West pipelines, forcing them to shut down their “status assessment” operations; later that same year in September, the Houthis triggered the shutdown of the Abqaiq oil processing facilities. This March 19, Iran attacked the Yanbu port, causing a temporary production shutdown.

U.S. own increased production: hard to fill the gap in the short term

Within the timeframes of scenarios one to three, the pace of the U.S.’s increased production response is too slow to play a substantive role. Even within the two-quarter window of scenario four, the upstream industry faces problems with the structure of the price curve—Bloomberg WTI fair value is currently about $73 per barrel in the 2027 annual average and about $70 in 2028, only slightly above or roughly in line with the average upstream incentive costs in the Permian region.

More notably, from mid-March to late March, the number of U.S. oil drilling rigs fell slightly to the lowest level since last December. Deutsche Bank judges that under the current curve structure, the U.S. supply response is unlikely to appear at a sufficient scale and speed—unless scenario four becomes reality.

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