Peace deal brings Relief To Energy Markets

Key takeaways:

• The recent decline in oil prices suggests that a large part of the previous increase was driven by geopolitical risk premium rather than a major change in physical supply.

• The easing of military tensions has removed part of that risk premium, but markets are still waiting for clearer evidence of lasting stability.

• It remains too early to expect oil prices to return to pre conflict levels without a final deal that can support durable peace.

• The Strait of Hormuz should not be seen in simple open or closed terms, as complete zero traffic was unlikely to have lasted for a sustained period.

• Even if stability fully returns, traffic through the Strait of Hormuz will take time to normalize because existing bottlenecks need to be cleared.

• For Nigeria, the impact of higher oil prices is not straightforward, as the country exports crude while still relying on imported refined products.

• Higher crude revenues only create broader economic benefits if windfalls are effectively captured, managed and invested in the domestic economy.

• Nigeria’s net gain from higher oil prices may be limited by its dependence on imported products and feedstock for agriculture, industry and manufacturing.

• To benefit more from future periods of higher prices, Nigeria would need to increase production capacity and attract more investment.

• Nigeria’s offshore, deepwater and ultra deepwater resources offer significant long term potential, but unlocking them depends on stronger investment conditions.