Oil prices tumbled Monday after the US and Iran announced that they had reached a peace agreement, to be signed in Switzerland later this week, with Brent futures down about 5% at around $83 per barrel by evening.This is the closest the two countries have come to a deal since the West Asia war began in late February, raising hopes of a pick-up in maritime traffic through the Strait of Hormuz. But energy and shipping experts, though optimistic, are approaching the development with considerable caution.India, which depends heavily on West Asian imports to meet its oil, natural gas, and liquefied petroleum gas (LPG) needs, is watching the developments closely. Government sources said they hoped the deal would ease energy flows from the region, but are not fully convinced yet. Oil and gas sector insiders are similarly optimistic about the prospect of Iranian oil and gas returning to international markets as part of the agreement, but remain wary of counting on it.Read | First Indian LNG carrier transits Strait of Hormuz after US-Iran peace dealThe key concern is most of the deal’s terms are still unknown. It remains to be seen how the agreement — if signed — will play out in the fraught waters of the strait, which used to carry a fifth of global oil and liquefied natural gas (LNG) flows before the war began.Besides, this is not the first announcement promising unimpeded maritime traffic through the strait in the past three-and-a-half months. Earlier announcements came to nothing, and the security situation in the Gulf remained precarious enough for shippers and energy exporters to hold off.Even if the deal holds and vessel movements through the strait pick up meaningfully — once shippers feel safe letting their vessels cross the waterway — it will take months for energy flows to recover to pre-war levels. The war forced major Gulf energy producers to shut in large volumes of oil and gas production, as shipping activity in the region ground to an effective halt and they could not evacuate output for export markets.Read | Who won the Iran-US war — Trump or Tehran? And who lost?The disruption has hit India hard. Around 40% of India’s crude oil imports, 60% of its LNG imports, and 90% of its LPG imports came from West Asia through the strait. The country’s import dependence stands at over 88% for oil, 60% for LPG, and about 50% for natural gas.Story continues below this ad“…a signed agreement is not a functioning one, and the sequencing dispute, with both sides insisting the other must move first, remains the main fault line, while Lebanon continues to represent a wildcard that neither Washington nor Tehran fully controls. Markets have seen this playbook before, with an initial rally on the headline followed by a fade as implementation risk re-emerges and there is little to suggest that pattern has been broken,” said Claudio Galimberti, Chief Economist at Rystad Energy.“A return to normalized market conditions immediately upon signature in Switzerland would look optimistic, as sentiment has clearly improved… but sentiment is not the same as supply. It will take time for production to ramp back up, for logistics to normalize, and for the risk premium embedded in crude prices to dissipate, particularly given that the structural shift implied by the UAE’s exit from OPEC+ is not reversed by any near-term diplomatic outcome. If the deal holds, it will therefore represent a step in the right direction, and an important one at that, but still a step rather than a destination,” Galimberti added.Read | What’s in the Iran-US deal? 14-point memorandum reportedly covers Hormuz, sanctions, $300 billion rebuildOil prices remain about 20% above pre-war levels, reflecting the market’s continued unease over supply risks and transit through the strait. Even if the agreement succeeds and eventually leads to normalisation of traffic through the strait, crude oil prices could take up to a year to return to pre-war levels, beyond any knee-jerk short-term easing, according to Prashant Vasisht, Senior Vice President and Co-Group Head, Corporate Ratings, at ICRA. Gulf energy infrastructure — export terminals, refineries, oil fields, and LNG processing units — could take months, even years in some cases, to return to normal production.“Beyond the immediate price action, crude prices could take six months to one year to normalize to pre-war levels given that almost 10-11 million barrels per day of production has been shut in West Asia, besides which some facilities have suffered damages. Additionally, removal of sanctions on Iranian crude would be positive for India given the geographical proximity as well as the higher credit period offered historically, if the same terms continue,” Vasisht said.Story continues below this adIf shippers resume regular operations through the region, the opening of the strait could allow large volumes of oil, petroleum products, and LNG — currently stranded on vessels in the Gulf — to be evacuated over the coming days, easing the supply situation in the near term. According to some estimates, about 180 million barrels of crude oil and refined fuels, and over 1 million tonnes of LNG, are stranded in the Gulf.As far back as March 20, international brokerage CLSA, in a report titled “If the war were to end tomorrow…”, had said that any news on the opening of the strait could drive a “reflex pullback in crude oil and LNG prices”. But it also foresaw a much tighter post-war supply-demand balance for oil and LNG versus pre-war levels, owing to “risks on pace of restart of production from the Gulf as well as likely new re-stocking demand”.“We believe that the war has fundamentally changed the demand-supply equation for the next few quarters versus the popular opinions held at the start of 2026. On the supply side, restart of oil as well as LNG feeding gas fields in the Hormuz countries may be a process running into a few months with uncertainty, with risk of some permanent loss in production levels of some wells. On the demand side, rising focus on energy security as well as depleting strategic inventory may drive demand for both crude oil as well as LNG to a higher level than envisaged a few months ago,” CLSA said, adding that the medium-term reality after the war could see “higher for longer crude and LNG prices”.India, like many other nations, has been hoping for a quick end to the war and a rapid normalisation of global energy flows. While diversified crude sourcing has helped maintain adequate availability of oil, petrol, diesel, and jet fuel, the Government was forced to ration gas supplies to certain industries and commercial consumers to protect households and priority sectors. The surge in international prices also forced India to import oil and gas at sharply elevated rates, with supply security taking precedence over cost.Story continues below this adIndia imports 1.8-2 billion barrels of crude oil a year, meaning every $1-per-barrel rise in prices adds up to $2 billion to the country’s annual oil import bill. A March report by Nomura ranked India among the three most vulnerable Asian economies to high oil prices, alongside Thailand and South Korea, in terms of import bill and current account balances. It found that every 10% increase in oil prices typically widens India’s current account deficit by 0.4% of GDP.