Iran’s indication that the Strait of Hormuz will be open to friendly shipping, combined with signals from United States (US) President Donald Trump that military objectives are close to being achieved, point to a potential easing in global energy risk.

Iranian officials have confirmed that the Strait of Hormuz will open with only one key qualification: vessels linked to what they describe as hostile states are not assured safe passage. If realised, that means that the bulk of shipping headed through the strait to China, India, and much of Africa should be able to pass largely unhindered.

As a consequence, global fuel supply flows should improve, meaning that overall global fuel and energy costs recede.

Oil costs rose from around US$60 per barrel before the current conflict to shoot well through the US$100 level and have since fallen back to near US$100.

Despite the doom and fear mongering around that price level, a calculation done by The Common Sense shows that the global inflation-adjusted price of oil has sat at a fraction over US$100 since 2010, over a period that has seen the Middle East play host to 12 wars.

In a parallel good news signal for energy prices over the weekend, President Trump stated that Washington is “very close to meeting our objectives” in Iran, suggesting that the US is considering winding down its military efforts. He outlined a set of goals that must be achieved before any exit, including degrading Iran’s missile capability, dismantling its defence industrial base, and preventing future nuclear development, while emphasising the protection of regional allies.

Arguably, the bulk of those goals have already been achieved, and Trump may have been preparing American opinion for an exit of sorts.

Crucially, Trump indicated that responsibility for securing the Strait of Hormuz should ultimately fall to the nations that depend on it, suggesting a reduced long-term US role in policing the waterway.

US energy flows do not depend on the strait to any significant extent.

Frans Cronje told The Common Sense that, “taken together, the Iranian and US statements point toward a potential de-escalation path. Last week we published six scenarios for the Iran conflict and five of those identified near-term exit points that both the US and Iran might employ with the effect of opening Hormuz, and I think what we have seen over recent days is an effort by both sides to pursue key elements of those five near-end scenarios. Matched with the fact that a US$100 oil price is not a freak price level, there is quite a bit of information around now to say that, from an energy price perspective, things may calm again almost as suddenly as they escalated. That is not assured, but it is, on the balance of probabilities, a really plausible outcome.”