TD Securities’ Senior Commodity Strategist Ryan McKay projects that oil fundamentals will tighten materially even if a comprehensive deal fully reopens the Strait of Hormuz, with sizeable production losses and inventory draws expected between June and November. Market deficits are forecast to peak in July, reaching 9.7 million barrels per day, before gradually easing into year-end, leaving oil balances stressed despite improved Middle East flows. McKay estimates an additional 1 billion barrels of production lost and inventories falling another 800 million barrels over this period. Even under the most optimistic scenario, the barrel-counting math points to further material tightening in the oil market, with tanker logistics, travel times, and lag in bringing production back online contributing to the slow recovery. By September and into November, production increases from the Middle East are expected to shrink deficits notably, with flows recovering to roughly 12 million barrels per day via the Strait and 3–3.5 million barrels per day via bypass routes at Yanbu and Fujairah [1].
Commerzbank’s Volkmar Baur highlights that the Japanese Yen will remain pressured in the coming months as the Iran conflict keeps the Strait of Hormuz closed, sustaining high oil prices and negatively impacting Japan’s trade balance. Elevated energy costs are also weighing on rate differentials versus the US and Eurozone, delaying any recovery for the JPY despite a constructive medium-term outlook. Market expectations regarding the Bank of Japan are not influenced by rising oil prices, while expectations for the Fed and ECB rise significantly with oil price increases. This dynamic means that higher new borrowing will likely continue to weigh more heavily on the Japanese yen than on the US dollar. Baur expects the issue to recede once the Iran conflict ends, the Strait of Hormuz reopens, and oil prices begin to fall, but notes that this development will take time and will not proceed in a linear fashion. Consequently, a stronger JPY is generally expected over the coming months, though not without fluctuations [2].
Both sources emphasize the significant impact of the Strait of Hormuz situation on global oil markets and currency dynamics. TD Securities warns that even with a deal, oil market deficits will remain acute through the summer, while Commerzbank underscores the sustained pressure on the Japanese Yen due to elevated oil prices and ongoing conflict-related uncertainty. Neither source provides specific dates for a resolution or concrete evidence of increased tanker traffic, with TD Securities cautioning against premature optimism and noting Iran’s strategy to leverage market tightness [1][2].
CONCLUSION
Oil markets are expected to remain under stress with deep summer deficits, even if the Strait of Hormuz is reopened, according to TD Securities. Elevated oil prices are sustaining pressure on the Japanese Yen and Japan’s trade balance, with recovery likely delayed until the conflict is resolved and oil prices fall, as noted by Commerzbank. The ongoing uncertainty around Hormuz is driving high market impact across commodities and currencies.