US-Iran two-week ceasefire lowers the oil risk premium, but recovery in Hormuz flows remains the key variable

Overview

This report discusses the impact of the conditional two-week ceasefire reached between the United States and Iran on the global oil and gas market, shipping through the Strait of Hormuz, the recovery in crude oil and LNG supply, and the price path. UBS believes the ceasefire has already materially compressed the oil risk premium, but the factors that will truly determine the next leg of prices are whether Gulf tankers and LNG ships can pass back through the Strait of Hormuz, whether shut-in regional production can restart, and whether major GCC countries and Qatar's LNG facilities are willing to resume or expand shipments within the two-week window.

Core views

The core view is that the ceasefire has reduced the most extreme supply disruption risk, but the oil and gas market has not yet fully de-risked. The speed at which passage through the Strait of Hormuz resumes, Iran's proposed technical restrictions, shipowners' willingness to enter the Gulf, whether Saudi Arabia and the UAE accept Iran-coordinated transit arrangements, and whether Qatar restarts LNG facilities without visibility beyond two weeks will all affect the supply recovery in Q2. If flows gradually recover, oil prices could move toward UBS's prior base case of about five weeks of disruption; if recovery is slow or delayed, there remains upside risk to oil prices in the second half of 2026.

Analysis framework

The report uses an event-driven and supply-chain bottleneck analysis: it first assesses the immediate impact of the US-Iran ceasefire on the risk premium, then uses Gulf tankers en route, LNG ships, shut-in production, onshore inventories and facility restart timing to judge the supply recovery path, and maps the results to price assumptions for Brent, TTF and JKM.

Methodology notes

• Scenario analysisHormuz disruption recovery scenario

  Use an approximately five-week supply disruption as the base case and monitor whether flows gradually recover after the two-week ceasefire.

  UBS compares this week's developments with the base case in its earlier oil price update. That scenario assumes disruption lasts roughly five weeks and requires Hormuz flows to gradually recover in Q2 2026 in order to support Brent at USD100/bbl in Q2, USD85/bbl in Q3 and USD80/bbl in Q4.

• Supply chain bottleneck analysisStrait passage and storage constraints

  Passage for tankers and LNG ships is a prerequisite for production restarts.

  Because onshore inventories are full, regional production recovery requires tankers to arrive and resume loading first; on the LNG side, Qatar may need higher certainty beyond the two-week window before restarting facilities, as LNG plant restarts take time.

• Risk disclosureOil and gas investment risk

  Volatility in oil, gas and refining/chemical margins.

  The report's risk disclosure notes that the investment view is exposed to volatility in crude oil and natural gas prices, global refining, marketing and chemicals margins, and the normal exploration risks of oil and gas businesses.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Brent crude

  Directly affected by the recovery of supply through the Strait of Hormuz and the Middle East risk premium

  Strengths

  The ceasefire reduces the risk of extreme disruption, and the price has already reflected a lower risk premium.

  Weaknesses

  It still depends on tanker passage resuming and regional production restarting, leaving limited near-term visibility.

  Comparison

  Compared with before the ceasefire, prices have fallen from elevated risk-premium levels; compared with UBS's base case, flows still need to recover gradually in Q2.

  Risks

  If Hormuz passage recovers slowly, oil prices could still move higher in the second half of 2026.

• TTF European gas

  Affected by LNG supply recovery and pressure on European inventories

  Strengths

  If Qatar's LNG facilities restart, European gas supply risk could ease.

  Weaknesses

  Gulf LNG cargo passage remains constrained, and LNG plant restarts take time and greater visibility.

  Comparison

  The report forecasts a TTF average of EUR74/MWh for the remainder of the year.

  Risks

  If LNG restarts are delayed or Hormuz passage remains unstable, European gas prices could stay elevated.

• JKM Asian LNG

  Affected by the recovery of LNG exports from Qatar and the Gulf

  Strengths

  If the ceasefire holds, it should support the resumption of LNG transport.

  Weaknesses

  A two-week window may not be enough for LNG facilities to fully restart, and shipping risk remains.

  Comparison

  The report forecasts JKM at USD26/mmBtu for the remainder of the year.

  Risks

  If supply recovery is slower than expected, Asian LNG prices may come under upward pressure.

• Global oil and gas equities

  Influenced by oil and gas prices, supply recovery and expectations around geopolitical risk

  Strengths

  Oil prices remaining elevated can support upstream cash flow.

  Weaknesses

  A lower risk premium may weigh on near-term sentiment toward oil and gas stocks, and the report does not provide specific company ratings.

  Comparison

  This report is an industry event note rather than a stock valuation report.

  Risks

  Volatility in oil and gas prices, changes in refining/marketing/chemicals margins, and exploration risk.

Key data

• Ceasefire duration2 weeksThe United States and Iran reached a conditional ceasefire, with the condition that the Strait of Hormuz remains safely open.
• Gulf crude oil and refined products in transit172 million barrels, 187 tankersEquivalent to roughly 14 days of shut-in oil and gas output, or about 12 Mb/d.
• Gulf LNG cargoesAt least 20 LNG ships, about 2 bcmEquivalent to around 2% of European gas storage capacity.
• Combined shut-in liquid production in Saudi Arabia and the UAEClose to 4 Mb/dWhether the two countries are willing to ship through Hormuz via an Iran-controlled process is a key issue.
• Immediate Brent reactionDown about USD13/bbl to USD95/bblReflects a rapid decline in the geopolitical supply risk premium.
• UBS Brent base caseUSD100/bbl in Q2 2026, USD85/bbl in Q3 2026, USD80/bbl in Q4 2026This path requires Hormuz flows to gradually recover in Q2.
• Gas price forecastTTF EUR74/MWh, JKM USD26/mmBtuForecast for the remainder of the year in the report.

Impact & implications

For energy assets, the ceasefire news should temporarily lower the crude oil risk premium and may ease pressure on gas and LNG prices; however, the market still needs confirmation that the Strait of Hormuz has truly reopened to traffic. If vessel passage, GCC cargo shipments and the restart of Qatar's LNG facilities all proceed smoothly, oil prices may move back toward UBS's base case; if recovery is constrained by technical restrictions, political coordination or shipowners' risk appetite, supply tightness could persist and support oil and gas prices in the second half of 2026.

Risks

• The Strait of Hormuz does not fully, immediately and safely reopen.
• Iran's proposed technical restrictions cause vessel passage to be slower than expected.
• Shipowners are unwilling to enter the Gulf as the two-week ceasefire nears expiration.
• GCC countries such as Saudi Arabia and the UAE are unwilling to accept an Iran-controlled transit coordination process.
• Qatar delays restarting LNG facilities because there is insufficient visibility beyond two weeks.
• Volatility in crude oil and natural gas prices, refining/marketing/chemicals margins, and oil and gas exploration risks.
• If recovery is slow or delayed, oil prices still have upside risk in the second half of 2026.

What to watch

• Progress in broader talks between the United States and Iran that began in Pakistan.
• Actual vessel traffic and transit speed through the Strait of Hormuz.
• Whether the 187 tankers and at least 20 LNG ships in the Gulf resume crossing the strait.
• The pace of recovery in the nearly 4 Mb/d of shut-in liquid production in Saudi Arabia and the UAE.
• Whether Qatar's LNG facilities restart and when.
• Whether Brent stays near USD95/bbl or moves toward UBS's Q2 USD100/bbl scenario.
• Whether TTF and JKM prices reflect LNG supply recovery.