A peace deal has been reached between the United States and Iran, but getting oil to flow through the region again and helping gas prices return to pre-war levels may be more of a challenge.
That’s because the physical and economic damage done means consumers will need to get used to a “new normal,” according to at least one expert, where gas prices stay elevated for the foreseeable future.
“It’s optimistic that we might actually have an end to this conflict, and we might get some oil flowing through,” says professor of international business David Detomasi at the Smith School of Business at Queen’s University.
“We got comfortable with the fact that shocks were rare and that we could deal with them when they happen. Now they happen all the time — this is the new normal.”
The conflict has not only scarred the region, but has left a massive bottleneck in the Persian Gulf region, and it will take some time before oil and energy markets can catch up after several months of choked-off supply chains for oil, natural gas, fertilizer and other products.
Here’s what to know.
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What was announced?
U.S. President Donald Trump announced Sunday on his social media platform, Truth Social, that a peace agreement with Iran had been reached. That was also confirmed by Pakistan’s prime minister.
Trump, in his social media post, has also said energy prices will “drop like a rock” once the Strait of Hormuz reopens.
Prior to Sunday’s announcement, Trump had claimed multiple times that a ceasefire agreement was imminent, only to see fighting resume.
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So what makes this time different?
Detomasi says it’s because of the “deliberate inclusion” of other parties, as opposed to just Trump claiming a deal had been reached. This includes Pakistan confirming the announcement, which has been acting as an intermediary between Iran and the U.S. during negotiations.
Having both sides agree is a key signal of optimism that this deal could stick, but for oil and energy markets to truly see relief, the Strait of Hormuz needs to be fully reopened to shipping traffic again.
“The number one thing that we will need to see is actual movement of ships through the strait,” says economist Marc Ercolao at TD Economics.
“That’s what’s been holding back global oil supply. That’s materially tightened energy markets over the last little bit, and there seems to be, at least on the Iranian side, some go-ahead that this will happen.”
Although reopening the strait will no doubt get oil flowing again through the Persian Gulf region, it may not be as simple as opening a faucet.
“Even if you open up the strait, that doesn’t necessarily mean that the oil can flow freely if it’s bottlenecked by not being able to reach the port in the first place. There were some facilities on the other side of the Strait of Hormuz that were also damaged,” says economics professor Moshe Lander of Concordia University.
“There’s going to have to be some agreement here that not just you’re opening up Strait of Hormuz, but that you’re also going to allow parts and materials in to be able to get this rebuilt. That could take itself another couple of months as well.”
The peace agreement is scheduled to be signed in Switzerland on Friday.
However, if the Strait of Hormuz were to fully reopen to shipping traffic once the agreement is signed, how long will it take for prices at gas pumps to fall to levels seen before the Iran war began in February?
“The pump prices, gas prices, they typically adjust within days to weeks because retail prices are a reflection of what’s happening in the wholesale markets. So on the margin, we should expect some relief in the next couple of weeks, for sure,” says Ercolao.
“However, the entire normalization process of energy markets is going to take months. It’s going to be uneven. It’s going to be slow. We will not see drastic price decreases.”
Where gas prices are heading
Crude oil price movements are one of the main factors determining what consumers pay at gas pumps — including in Canada.
If there’s less oil available globally to meet expected demand for things like gasoline and jet fuel, then prices typically will rise. They can also fall if demand for those products falls or if there is an oversupply of oil, or both.
Expectations of a ceasefire and the strait reopening suggests a substantial increase in global oil supplies is on the way, which should translate to some relief at gas pumps this week.
As of publication, U.S. oil (West Texas Intermediate) was priced at about US$80 a barrel. That’s down from a recent peak during the conflict of about $113 in May, and still above about $65 in the days before the war began.
The national average for regular gasoline in Canada currently sits at just below $1.66 a litre, according to CAA. That’s down from about $1.90 a month ago, and $1.35 one year ago, while some consumers were paying well over $2 a litre at local gas stations.
McTeague says Canadians can expect gas prices to drop roughly 10-15 cents per litre over the coming days and weeks, meaning they may not get much lower than $1.50 for the national average anytime soon.
“Crude vessels run at the speed of a small bike. And so for a country to take delivery, maybe two or three months, not to mention the damage, physical damage that’s been done to many of the oil fields in the Persian Gulf, as well as some of those older oil fields that have also been disrupted,” says McTeague.
“It’s going to take a long time for things to get back to normal — that means higher prices for longer.”
How long until gas prices return to pre-war levels?
If a peace deal with Iran becomes a permanent and long-term agreement, it could take months, or even into next year before prices return to levels seen before the conflict began — if at all.
Lander says it could take three to four months before oil prices return to the $60 a barrel range, and that’s only if the deal holds and all facilities are repaired and shipments return to the levels seen before the war began.
Others think it will take even longer.
This means it could be by the end of the year before prices return close to pre-war levels again, but there could be other shocks to oil markets like geopolitical issues that will delay the process of normalization.
“The deal will have to hold indefinitely for the next one to two years. The normalization process for energy markets is going to take some time,” says Ercolao.
“We might not even get back to pre-war levels but we will definitely get back to manageable energy levels into 2027.”
This is a fine example of pure greed by oil companies. Our oil is Canadian and not imported. The oil companies are making billions and ordinary people are suffering…trying to pay for it and for food and for utilities just to mention a few things that have impacted us all due to this crisis on the other side of the world. We need a WORLD Government that cares about ordinary people.
Only in canada but our new broadcasters will be telling us this is worldwide challenge. In canada once they raise the prices they’ll just raise the carbon taxes as the fuel prices drop.
Today’s oil price approximately $80/ BBL.
Gas costs $1.59/ltr. to $1.90/ltr.
In July 2008 oil was $145/BBL yet gas prices were $1.40/ltr.
It’s just price gouging because they can!
Don’t wait for the price to drop, buy an EV. Canada does not import oil from Iran.
FYI The 10-year average price of WTI (West Texas Intermediate) crude oil from 2016 to 2025 is approximately $63.76 per barrel. This morning the price is $75 and dropping.
Anyone who believed the prices would go down is dreaming. They had a good excuse for raising the price to whatever they wanted they will not bring it back down that was a forgone conclusion. Since a lot of taxes are percentages on the price of gas why would these so called experts and governments collect less taxes than they are now by bringing the prices down
Experts don’t exist anymore.
Gas prices will never go back.
Just get an EV and stop worrying about prices.
@Anonymous
We have put additional items on fuel like the Clean Fuel Standard. We get you either, try to keep up
Liberals have no problem making gasoline and diesel with all the taxes they put on it. At least the consumer carbon tax was taken off but instead they added the “clean fuel standard”.
Oh of course they wont. Go up skyhigh overnight on a sneeze, but wont come down for months after a ‘deal. Time to burn oil barons out and curb stomp a few.
Greed.
Regardless of the war or not, fuel prices are way cheaper in the USA than Canada.
@Anonumous. Try City Gas on Victoria Trail in Edmonton. Also the Gas Station in Newton on 54st.
@Nancy: Try to keep up. Your sock guy is long gone.
@Vince: Horzezhit.
Alberta gasoline and diesel are within 10 cents of “pre-War”. Edmonton has gas at $1.35/L.
Liberals had added about 40 cents
Per liter for the consumer carbon tax, plus other federal taxes.
With Trump championing and fighting tooth and nail for lower gas while liberals try everything to raise the price is concerned.
Of course it’s not going to go down. The price of groceries won’t either. Once rich, greedy people get used to making a certain amount of money, they don’t go backwards.
Just paid 136.9 in Vernon today the day you said you won’t see prices near 135.0 anytime soon LOL the assumptions here are insane
Isn’t almost 50% of the price of gasoline or diesel taxes? Complain to your Govt not the companies making it.
Ofcourse not! Any excuse to increase but long delays before decrease.
Of couse not , down like a snail and up like a jack rabbit… gouging at its best
If there is ANY way our country can exploit this overly manipulated industry you can reliably count on Canada to do so….thanks to the government assisted criminal monopolies we are burdened with. It’s called a parasite infestation and it’s absolutely DISGUSTING!!!!
Liberals made gasoline more expensive with their carbon taxes than a war in Iran. Liberals approved the increase each year and was a major campaign promise lie in 2019.
NEVER F/ G ENDS, THEN U PAY AGAIN AT the SUPERMARKET ! ASK DEMON CARNEY IF HE GIVES a F/ K ?
THIS FORMER LIBERAL PR / CK Dan McTeague, JUST LOVES ANNOUNCING NEGATIVE NEWS ! HAS ANYONE ELSE NOTICED THIS A S S HOLE THRIVING ON SPREADING THE LOUSY NEWS ? OR IS IT JUST ME, NEVER ANY POSITIVE NEWS ON GASOLINE. WNATEVER IT MAY BE
ain’t it strange how that happens. Stuff goes up because of problems then never comes down again. who would have thought it
Artificially inflating fuel prices again, I see.
Liberals made gasoline and diesel spike for years with their consumer carbon taxes. And every year it would go up by 8c.
Gas prices began spiking two days after the USA Iran war began. This, despite the fact that the gasoline being sold was refined from existing, lower cost supplies. Gas prices should come down as quickly as they went up. Anything less is proof of price gouging. I’m talking to you, Competition Bureau.
Great time for Alberta with high oil prices.
if you think the price has anything to do with the Irani issue, I have a bridge for sale
That’s what you Cons get for supporting the Orange dictator. Cry you loosers.
Trudeau era consumer carbon taxes add more cost to gasoline and diesel then the Iran conflict ever did.
Why would it go back down?
Under the LIEberal goverment do you think they have any common sense, Carney will be like Trump and say gas will be the lowest it’s ever been cause of him.
Gouge
Well, that’s the whole point of this game of back forth. It’s….all….by….design.
“Gas prices may not return to pre-Iran war levels anytime soon, experts say”
You don’t have to be an ‘expert’ to figure that out.
” says economics professor”
For what it’s worth, an economist is an expert who will know tomorrow why the things they predicted yesterday didn’t happen today.
Of course not! Nothing ever does go back down!