When will the Strait of Hormuz return to normal? The market bets on a recovery before the end of June, but the energy sector sees it happening after November.

When will the Strait of Hormuz return to normal? The market bets on a recovery before the end of June, but the energy sector sees it happening after November.

A major cognitive misalignment regarding the Strait of Hormuz is quietly fermenting between the market and energy industry insiders.

Prediction market Polymarket shows an implied probability as high as 54% for a return to normal navigation by the end of June, with optimistic sentiment dominating pricing logic; however, oil and gas executives from the Dallas Fed's latest energy survey almost unanimously gave a completely different assessment—80% of respondents believe the earliest recovery will be in August, and about 40% push the timeline out to November 2026 or even longer.

UBS warns that the impact of this cognitive divergence goes far beyond short-term timelines. Industry executives remain highly alert to the possibility of another Strait disruption within the next five years, and a permanent increase in Persian Gulf transportation costs post-conflict is almost a consensus. The market logic hoping US output can fill the supply gap has also been sharply dampened by survey data. The energy market's current pricing framework may be systemically underestimating structural risks.

Industry Executives: Recovery Before August? Unrealistic.

The Dallas Fed survey data clearly presents the timeline judgments of energy executives: only 20% of respondents believe normal navigation in Hormuz may recover by May 2026; 39% say August; 26% extend the timeline to November; and another 14% believe normalization will be seen only after November. This means a full 80% of industry insiders believe August is the earliest, and nearly 40% think the probability of a complete resolution within the year is fairly limited.

In comparison, Polymarket's implied probability for normalization in May is 34%, and by the end of June as high as 54%, both significantly higher than industry expectations.

The survey points out that even in the very short term, there are clear differences—the industry’s probability for May is only 20%, 14 points lower than Polymarket. For longer-term persistent disruption risks, the industry's "fat tail" expectations far outweigh market pricing.

Long-term Vigilance: Industry sees high probability of another disruption in the next five years

UBS believes the survey reveals not just short-term timeline divergence, but also deep concerns about geopolitical structural risks.

The survey shows 48% of executives believe that in the next five years, geopolitical events will "very likely" disrupt Hormuz passage again; only 14% consider this scenario "unlikely."

This data indicates that even if the current situation eventually calms, the strategic vulnerability of the Strait of Hormuz as a global energy artery has reached broad consensus in the industry. For institutional investors holding Middle Eastern energy-related assets long term, repricing of geopolitical risk premiums under this backdrop may just be a matter of time.

Transportation Costs: Hard to Return Even After Conflict Ends

Even if the situation in Hormuz eventually stabilizes, investors should not expect logistics costs to return to pre-conflict levels.

The survey shows 79% of executives expect that after the conflict, transportation costs for Persian Gulf exports—including insurance, freight, and tolls—will increase by at least $2 per barrel; within that 79%, 43 percentage points anticipate a rise of $4 or more per barrel.

This forecast has clear investment implications: for refiners, shipping companies, and downstream consumers reliant on Persian Gulf crude, cost structures have shifted from cyclical fluctuation to a trend of rising costs. Upstream E&P companies may benefit from price resilience, but mid- and downstream sectors highly sensitive to logistics costs face ongoing pressure on profit margins.

US Output Increase: Market Should Not Over-rely on This "Buffer"

Facing the potential supply disruption at Hormuz, some market participants expect US shale oil to ramp up quickly and fill the gap.

But survey data sends a clear negative signal: 90% of executives expect, due to this conflict, the increase in US oil production in 2026 will not exceed 500,000 barrels per day, and this assessment hardly changes for forecasts into 2027.

This shows that treating US supply elasticity as the core tool to hedge geopolitical risks will likely underestimate the actual supply deficit. Especially if disruption at Hormuz persists, the pressure on the global crude supply-demand balance could be harsher than current market pricing reflects.

For energy market investors, the central price of crude oil, shipping insurance costs, and risk premiums for Persian Gulf assets all have room for repricing under current circumstances. Maintaining vigilance for tail risks in geopolitics may be steadier than simply following the optimistic sentiment of the prediction markets until the Hormuz situation truly clarifies.

 

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The above content is from Chasing Wind Trading Desk.

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