MW The oil market thinks the worst is over from the Iran war. The damage suggests otherwise.
By Myra P. Saefong
Costly repairs in the Middle East point to a slow recovery - a condition that may result in crude prices staying higher for longer
Estimates of the repair bill for Middle Eastern energy infrastructure stemming from the Iran war continue to climb.
The oil market desperately wants to move on from the Iran war. However, the extent and cost of the damage implies that the Middle East is facing a lengthy rebuild, and the real issue isn't the cost of the bill - estimated at around $50 billion by Rystad Energy -but how long supplies could remain offline, keeping crude markets tighter long after any peace accord has been cemented.
Just three weeks ago, Rystad Energy estimated repair costs across the Persian Gulf's energy infrastructure at $25 billion. But in a report Wednesday, it doubled that estimate given that the "scope of the damage has expanded materially."
"I think everybody is trying to assess what oil markets will look like in 'the day after,' but to be honest, everyone is flying blind," Tom Kloza, chief oil analyst for Gulf Oil, told MarketWatch.
Meanwhile, repair and restoration costs for energy-linked infrastructure - which include wells, power and desalination plants, as well as oil and gas facilities - could lift that cost to up to $58 billion, according to analysts at Rystad.
"This is no longer just a story about damaged facilities in the Gulf. It is a stress test for the global energy supply chain," said Karan Satwani, Rystad's senior analyst of supply-chain research.
Satwani said the same equipment and contractors needed for rebuilding are already committed to a wave of liquefied-natural-gas and offshore projects sanctioned since 2023.
At the same time, the temporary U.S.-Iran cease-fire, stalled negotiations, renewed escalation risk, and potential disruptions and blockades affecting shipping through the Strait of Hormuz continue to shape the operating environment, Rystad analysts noted. That's changing how the recovery will unfold.
Capital availability is not the primary constraint, they added. Instead, access to equipment, contractors and logistics is emerging as the "key limiting factor."
Rising costs
Following the temporarily two-week cease-fire between the U.S. and Iran that began on April 8, military strikes in the region have moderated but global oil prices have remained high.
On Wednesday, Brent crude for June delivery (BRN00) (BRNM26) traded at $94.86 a barrel. Front-month prices are trading around 30% higher since Feb. 27, the last trading day before the war began, FactSet data show.
Following the military strikes the preceded the cease-fire, the potential total repair costs associated with oil-and-gas infrastructure in the region are estimated to be between $34 billion to $58 billion, including an average of $5 billion for industrial, power and desalination asset repairs, according to Rystad Energy.
It is worth noting that repair work would not create new capacity, Satwani said. Instead, the work would redirect existing capacity, and that redirection will be felt in project delays and in inflation far beyond the Middle East.
"The $58 billion bill is the headline, but the knock-on effects on energy investment timelines globally may prove just as significant," said Satwani.
Experts expect the conflict in the Middle East to change perspectives, priorities and investment drivers in the energy market for decades to come.
Read more: The Strait of Hormuz could matter a lot less in the future - here's how
The repair timeline
About six weeks after the Iran conflict began, more than 60 energy-infrastructure assets in the Persian Gulf had been affected by drone and missile strikes, with roughly 50 sustaining varying degrees of damage, strategists at J.P. Morgan wrote in a note released on April 9.
The J.P. Morgan strategists said they did not expect most attacks to cause long-lasting disruptions, though some facilities will face lengthy repair timelines - and at least eight assets appeared to be severely damaged.
They estimated that Qatar's Ras Laffan complex, home to the world's largest LNG export facility, may require years of repairs to restore just 17% of its damaged capacity. Qatar has said it will take up to five years to repair damage to the Ras Laffan site, according to a late March report from the Wall Street Journal.
Energy-facility repairs in the Middle East are likely to focus on a return to market "as quickly as possible to start revenue flows for Gulf countries who have had to dip into financial reserves during the conflict," said Gary Cunningham, director of market research at Tradition Energy. He said he expected refined products to be "secondary" and be sequenced in over the next eight to 18 months.
Energy-facility repairs in the Middle East are likely to focus on a return to market 'as quickly as possible' to start revenue flows for Gulf countries.Gary Cunningham, Tradition Energy
For the most part, from an oil perspective, Cunningham said he expects most of the non-Iranian production and processing to come back into service by the fourth quarter if a lasting peace is agreed to in the coming month.
Of course, there's always the chance for an even quicker recovery.
Josh Young, chief investments officer at Bison Interests, an oil-and-gas investment firm, pointed out that refineries and chemical plants have fires and explosions all the time in the U.S. and elsewhere, and they mostly seem to be back up and running within a month.
Russian energy infrastructure has also been attacked repeatedly by Ukraine amid the countries' four-year war - but despite big explosions at some facilities, the impact has seemed minimal, Young noted.
Mark DeCambre contributed.
-Myra P. Saefong
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 15, 2026 17:30 ET (21:30 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments