If the Strait of Hormuz suddenly reopened tomorrow, would oil and gasoline prices immediately collapse?

I wouldn't bet on it.

Hormuz is obviously the biggest piece of the puzzle. The possibility of a stable agreement between the US and Iran could remove a huge geopolitical risk premium from the oil market.

But there is another problem that could keep fuel prices painfully high even after the Strait becomes fully operational again:

The world needs refineries. And refining capacity is under pressure.

Hormuz Is Only Half the Story

The Strait of Hormuz is one of the world's most important energy chokepoints. Any uncertainty surrounding tanker traffic can immediately affect crude prices, shipping costs and market expectations.

Brent has recently remained around the $80+ area as conflicting signals surrounding the conflict continue to create uncertainty.

So yes, a diplomatic breakthrough between Washington and Tehran could trigger a significant relief rally.

But cheaper crude does not automatically mean cheap gasoline.

And this is where things become interesting.

The Refinery Problem

For decades, consumers could roughly associate expensive crude with expensive gasoline.

Today, that relationship is becoming much more complicated.

Crude oil has to be processed into gasoline, diesel, jet fuel and other products. If refining capacity becomes constrained, the price of those products can remain elevated even when crude prices start falling.

And global refining capacity is already operating with limited spare capacity. Some refineries have been damaged, shut down or forced to reduce production because of the conflicts in the Middle East and Ukraine.

Russia is a particularly important example.

Ukrainian drone attacks have repeatedly targeted Russian refineries. In May, facilities representing roughly one-quarter of Russia's total refining capacity were reported to have halted or reduced operations, affecting more than 30% of Russian gasoline production.

And the Middle East is facing its own refining disruptions.

The Jazan refinery in Saudi Arabia, which has a processing capacity of around 400,000 barrels per day, was shut following a Houthi attack in late July. Today, another Houthi drone attack was reported against the same facility.

This is not exactly the environment you want when global fuel markets are already tight.

Why This Matters for Gasoline Prices

Imagine this scenario:

Hormuz reopens.

Oil prices fall.

Everyone celebrates.

But refineries are still operating near maximum capacity while some major facilities remain offline.

The result?

Gasoline and diesel could fall much less than crude oil.

This is why the next few months could be particularly uncomfortable for consumers.

The summer driving season may end and normally that would put downward pressure on fuel demand. But if refining capacity remains constrained, the seasonal decline may not be enough to produce a dramatic drop at the pump.

And then comes winter.

Europe could face additional pressure on diesel and other refined products if the current disruptions persist.

The Real Risk

The biggest mistake would be to think that “Hormuz reopens = energy crisis over.”

It isn't necessarily that simple.

Hormuz determines how much crude can move through one of the world's most important chokepoints.

Refineries determine how much usable fuel can actually reach consumers.

Those are two different problems.

So even if diplomats manage to stabilize the situation in the Gulf, I wouldn't be surprised to see oil and especially refined fuel prices remain elevated well into the autumn.

For drivers, businesses and an already inflation-sensitive global economy, that's the part of this crisis worth watching next. ⛽

The Strait of Hormuz may reopen. The refinery problem won't disappear overnight.