Oil prices plunged sharply after the U.S. And Iran agreed to a brief ceasefire, sparking hopes for a reopening of the crucial Strait of Hormuz. But Bank of America warns the market is ignoring a harsh reality: production cuts won’t lift anytime soon.

Ceasefire Sparks Oil Price Volatility, But Production Remains Locked

On April 8, Brent crude prices dropped about 13%, marking one of the steepest single-day falls since April 2020. U.S. Crude futures also took a hit, reflecting optimism that the two-week ceasefire between the U.S. And Iran would ease tensions and allow tanker traffic through the Strait of Hormuz to resume. The narrow waterway is a critical artery for global oil supplies, and its closure has kept millions of barrels of oil and natural gas stranded in the Persian Gulf.

Bank of America analysts warned that even if tankers start moving, most oil fields will stay offline. The ceasefire allows safer passage through the strait, but production cuts tied to the conflict won’t reverse in just two weeks. Restarting oil operations after prolonged shutdowns takes specialized crews, pipeline testing, and safety checks that stretch well beyond this short window.

The bank’s note said plainly, "Boats will move, but oil fields stay shut." "Oil is still tightening." In practice, the ceasefire won’t immediately boost supply. The oil market may see some relief in tanker flow, but production volumes won’t rebound anytime soon.

Production Shutdowns and Market Tightness

Bank of America estimates that roughly 11 million barrels per day of oil production remain offline across the region. That’s a huge chunk of global supply, and reactivating those fields isn’t as simple as flipping a switch.

Testing pressurized equipment, certifying pipelines, and meeting safety standards take weeks or months.

Industry voices echo this timeline. Joe Brusuelas, chief economist at RSM US, told Axios that restarting production could take anywhere from three to six months. Neil Roberts from the Lloyd’s Market Association expressed skepticism about an immediate resumption of trade into the Gulf, emphasizing the complexity of safely reopening the market.

In the meantime, oil prices remain elevated despite recent volatility. Benchmark Brent crude touched highs above $119 per barrel earlier in the conflict before falling back near $96 amid ceasefire hopes. U.S. Crude futures hovered just below $98, still up roughly 3.7% on the day of the ceasefire announcement.

Geopolitical Risks and Market Fundamentals Shifted

The war with Iran has erased a large oil inventory surplus that had built up in the latter half of 2025. Before the conflict erupted, markets anticipated a glut of around 400 million barrels, which analysts believed could balloon further and push prices toward the low $50s per barrel. Instead, within five weeks of the war, that surplus evaporated entirely.

Bank of America highlights that these new fundamentals will keep shaping the oil market. The geopolitical risk has been validated, forcing customers worldwide to hoard supplies amid uncertainty. The International Energy Agency’s coordinated release of 400 million barrels from strategic reserves helped cushion the blow but also created an obligation to refill those reserves, adding a layer of future demand.

"Balances are now much tighter, mid-cycle oil is higher, geopolitical risk is validated, and global strategic reserve refills will likely firm future demand," the analysts noted.

Stock Market Reactions Reflect Mixed Sentiment

U.S. Stock markets responded to the ceasefire news with cautious optimism. This S&P 500 closed up 0.6% after an early dip, supported in part by easing tensions between Israel and Lebanon, which reduced fears that the ceasefire was already unraveling. The Dow Jones Industrial Average gained 275 points, and the Nasdaq rose 0.8%, signaling investors’ relief but also recognition of ongoing risks.

Oil prices, while retreating from their morning peaks, remained elevated due to the unresolved production shutdowns and potential for conflict resuming. Asian and European markets, however, showed more caution.

Europe’s Stoxx 600 ended the session down 0.4%, weighed down by travel and leisure stocks, as Iran’s parliament accused the U.S. Of violating the ceasefire less than a day after it was agreed.

President Donald Trump stated that U.S. Military forces would stay in and around Iran until Tehran fully complied with what he called the "real agreement," warning that any breach could trigger a military response larger than previously seen. That statement injected fresh uncertainty into the market, tempering enthusiasm for a quick resolution.

What This Means for Oil Stocks

Bank of America’s warning carries weight for investors eyeing oil stocks. The initial market reaction to the ceasefire—marked by sharp oil price drops—may have overlooked the slow and difficult road to restoring production. That means energy companies tied to regional output might not see immediate relief or rebounds in stock prices.

Plus, the ongoing geopolitical tensions keep volatility high. The Strait of Hormuz remains a flashpoint, and any renewed fighting could disrupt both tanker traffic and oil infrastructure, pushing prices even higher and deepening supply shortages.

In this environment, oil stocks face a tricky balancing act. Investors must weigh hopes for a peaceful resolution against the reality of prolonged production shutdowns and the risk of new conflict flare-ups.

Related Articles

The ceasefire gives a short break but won’t restart oil production quickly. Bank of America’s analysis is a reminder that while tanker traffic might pick up, the oil market’s tight supply and geopolitical risks won’t ease overnight.