The conflict between the United States and Iran entered its ninth week on Friday having settled into a pattern that markets are only beginning to price correctly. A formal ceasefire has been in place since April 7. The Strait of Hormuz has not reopened. Both sides are conducting naval blockades, seizing each other’s vessels, and trading accusations of ceasefire violations, while diplomats shuttle between Islamabad and Washington in search of a framework neither side has yet accepted. This is not resolution. It is a frozen conflict with an open energy wound.

The Diplomatic Picture This Week

President Trump extended the U.S.-Iran ceasefire on Wednesday after Pakistan, the designated mediator, requested more time. Reports emerged Friday morning that Iranian Foreign Minister Seyed Abbas Araghchi is expected to arrive in Islamabad to resume talks with U.S. negotiators. Brent crude fell roughly 0.4% on the news, from above $107 to around $104, illustrating the market’s sensitivity to even preliminary diplomatic signals.

The diplomatic picture is complicated by the conditions Iran has tabled at Islamabad. According to analysis published this week by the Al Habtoor Research Centre, Tehran has entered negotiations demanding formal recognition of Iranian sovereignty over the Strait of Hormuz, a transit fee of $2 million per vessel, full withdrawal of U.S. combat forces from Middle East bases, and comprehensive war-damage compensation. These terms are not a negotiating opening position designed to split the difference. They are structural demands that would fundamentally alter the maritime and geopolitical architecture of the Gulf region. The gap between those demands and what Washington is prepared to offer is the reason the strait remains closed nine weeks after the shooting stopped.

Separately, Trump announced Thursday that Israel and Lebanon have agreed to extend their ceasefire by three weeks, with both countries’ leaders expected to meet in Washington. That development removes one active escalation vector and is modestly positive for regional stability, though its direct effect on the Hormuz situation is limited. Hezbollah’s role as an Iran-backed militia means the Lebanon ceasefire and the Iran standoff are linked in the background even when they appear to be separate tracks.

Brent Crude: Price Path Through the Conflict
Brent crude front-month futures (USD/barrel), February 27 to April 24, 2026. Key event markers shown.
$115 $100 $90 $80 Feb 27 Mar 1 Mar 14 Apr 7 Apr 17 Today $72 $111 $90 $104 Strikes Ceasefire
Source: CNBC, The National, Al Jazeera, Commodity Context (Rory Johnston), Al Habtoor Research Centre, Kpler

Why the Strait Stays Closed

The Strait of Hormuz has been functionally closed to commercial traffic since the conflict began on February 28. Iran’s military controls the northern coastline and has demonstrated the capability and willingness to interdict vessels. The U.S. Navy has established a parallel blockade of Iranian ports. Both sides are using economic leverage rather than military escalation to press their negotiating positions.

Commonwealth Bank of Australia published analysis Friday suggesting the U.S. will ultimately be the first to back down, citing mounting domestic political and economic costs. Former U.S. Ambassador to Bahrain Adam Ereli offered a counterpoint this week, arguing that Tehran is prepared for extended sanctions and can route oil exports through alternative channels, potentially outlasting both Trump’s patience and U.S. public support for the campaign.

The market is pricing a range scenario rather than a clean resolution. Kpler’s Matt Stanley described April’s oil price movement as “bookends”: starting around $105, dropping to $90 by mid-month after a brief reopening declaration, then climbing back above $105 as the strait closed again within days. That oscillation pattern reflects a market that has stopped believing in clean resolution and started pricing an extended, volatile range.

The Structural Shift in the Oil Story

The most consequential analytical development of the past week is not the daily price move. It is the growing consensus among commodity analysts that even a full strait reopening would not return Brent crude to pre-war levels near $68 to $72 per barrel. Commodity Context’s Rory Johnston estimates that reopening would produce an immediate drop of $10 to $20, but that supply chain bottlenecks, infrastructure damage, lingering production outages, and elevated insurance premiums would keep Brent anchored in an $80 to $90 range. The Al Habtoor Research Centre’s analysis projects Brent stabilising in a volatile $95 to $115 range in the base case of extended ceasefire-without-resolution, citing the U.S. Energy Information Administration’s own projection of approximately $115 average in the second quarter of 2026.

For Canadian portfolios, this structural repricing changes the calculus on energy sector exposure. Canadian oil sands economics improve meaningfully above $70 WTI. At $90 to $100 WTI, producers such as Suncor, CNQ, and Cenovus generate significantly elevated free cash flow relative to their 2025 planning assumptions. If the new oil floor is $80 rather than $65, the earnings case for Canadian energy names is structurally stronger than it was before February 28, independent of near-term ceasefire noise.

The risk to that thesis is demand destruction. Sustained oil above $100 per barrel historically produces demand responses: fuel switching, travel reduction, and recessionary pressure that eventually reduces consumption. Goldman Sachs strategist Dominic Wilson noted in late March that equity market reaction will ultimately hinge on conflict durability. A prolonged high-price environment that tips major economies toward contraction is bearish for energy demand even when it is temporarily bullish for energy prices.