Is the Iran war just an energy shock?

The Iran war's disruption to global crude oil and LNG markets is already being measured in lost barrels and higher prices.

Now, with a U.S.-Iran peace deal expected to reopen the Strait of Hormuz, the reckoning begins: was this a watershed moment, or merely another blip?

Consider two precedents.

The Volkswagen "Dieselgate" scandal over rigged emissions tests in 2015 seemed innocuous at first, but signalled the demise of diesel passenger cars and the rise of electric vehicles (EVs).Also read: US at odds with allies over how easy it is to reopen Hormuz By contrast, Russia's 2022 invasion of Ukraine caused a dramatic surge in energy prices, yet the market's ability to reroute flows and absorb the shock meant the impact proved short-lived.

Certainly, the market has so far worked its magic in dealing with the effective closure of the Strait of Hormuz since the U.S.-Israeli attacks on Iran began on February 28.

At least 1 billion barrels of crude oil and refined products have been lost from Middle East producers ‌such as Iraq, Kuwait, the United ⁠Arab Emirates and ⁠Iran itself.

As much as 20% of global liquefied natural gas supply is also trapped in the narrow waterway between Iran and Oman.

A combination of strategic and commercial inventory releases and a dramatic reduction in imports by China, the world's biggest crude importer, has helped keep benchmark Brent crude futures under $100 a barrel for much of the current crisis.

It could also be argued that optimism about a deal to reopen the Strait has played its part, with traders seemingly willing to believe President Donald Trump's numerous social media posts that an agreement was imminent.

That long-awaited deal began to materialise on Sunday when the U.S. and Iran announced they had agreed on a framework that could allow vessels to resume transit.

By Monday, Trump said oil tankers were starting to move out of the Strait.

While full details of the agreement have yet to be publicly revealed, the prospect of tankers soon entering and exiting the waterway without hindrance raises the question of what happens next.

The first effect would be a short-term sugar hit of relief for energy markets as tankers trapped in the Gulf exit and deliver cargoes.

This would ⁠be followed ‌by efforts to restore flows and supply chains to pre-war levels, and by the longer process of rebuilding depleted inventories.

This could mean crude oil and LNG prices stay higher for longer as the lost barrels are replaced, but much will depend on how rapidly Middle East producers are able to ramp up output and exports, and whether the OPEC+ group is actually able to ⁠pump the higher volumes it has agreed to produce.Also read: Goldman Sachs cuts India's 2026 CAD forecast to 1.3% of GDP BEHAVIOUR CHANGES?

But the bigger question is what the long-term impact will be.

Much will depend on the view taken by both consumers and governments, especially in energy-hungry Asia, the fastest-growing region.

Consumers who have the ability to change are likely to consider switching to electric or hybrid vehicles to insulate themselves from future diesel and gasoline price shocks.

An early snapshot of how this may look is provided by Australia, the world's biggest importer of diesel and a country reliant on overseas refineries for over 80% of its fuel requirements.

Australian EV sales hit a record high in May, with a market share of 20%, and when combined with hybrid vehicles, the share climbed to 46%.

This is approaching levels in China, the leading EV manufacturer, where EVs and hybrids accounted for more than 50% of sales in 2025, and rose to 60% in May this year.

Government policies are also likely to shift in favour of boosting renewables and electrification over fossil fuels.

Dieselgate saw the motor fuel fall out of favour, especially in Europe, where its share of passenger car sales dropped from around 52% in 2015 to under 10% by 2025.

Asian countries such ‌as Vietnam are already putting in place policies to encourage EVs and electric scooters, and that momentum is likely to grow across the region.

LNG is also at risk in Asia as countries weigh the security risks of an imported fossil fuel against buying solar panels, wind turbines and battery storage from China, or developing domestic industries with Chinese backing.

One fossil fuel that may emerge as a long-term winner from the current crisis is coal.

Countries with vast ⁠domestic reserves, such as China, India and Indonesia, will be tempted to keep using the fuel given its cost advantage and supply security, even if it makes reducing carbon emissions more challenging.

Importing countries may also deem coal a safer bet, given that the major exporters - Indonesia, Australia and South Africa - have traditionally been reliable suppliers and that shipments aren't at risk from chokepoints like the Strait of Hormuz.

However, a long-term shift away from crude oil and LNG isn't assured, as producers and exporters of these fuels are unlikely to take their demise lying down.

Getting people to forget the last crisis may be as simple as ensuring prices drop rapidly and stay low for an extended period.

The early market reaction -with Brent tumbling 4% to $83 on the deal announcement - suggests that process may already be underway.

If diesel and gasoline vehicles are cheap to refuel and LNG can compete with coal and renewables, it's possible that governments and consumers will forgive and forget the disruption and costs of the Iran war, much as they did after previous conflict-induced price spikes.

The views expressed here are those of the author, a columnist for Reuters. ...