Oil shock 'far from over' as analysts warn of new Middle East risk premium

Investors cheered the prospect of a U.S.-Iran peace deal on Monday, but oil price volatility is likely to continue in the near term, as analysts warned that energy markets now face a "geopolitical risk premium" after the war.

Global oil inventories, which have declined due to the prolonged closure of the Strait of Hormuz, will need time "to be rebuilt and are likely to fall further before new supplies begin to arrive from the Gulf," according to a note from Westpac.

"While an easing in global tensions is welcome news, the devil remains in the detail and hence uncertainty is likely to remain elevated," the bank added.

Daniel Hynes, senior commodity strategist at ANZ, told CNBC the energy shock is "far from over," adding that he does not envisage shipping traffic through the Strait of Hormuz returning to pre-conflict levels for the foreseeable future.

"The difficult phase is ahead of us," Hynes told CNBC's "Access Middle East" on Monday. "It's going to be a very, very challenging recovery process."

He pointed to multiple pressures, including heavy drawdowns on oil inventories, along with the risks of mines in the Strait, and the maintenance and repairs of ships that had been stranded in the region.

"I suspect it could take weeks, if not a month or two," Hynes added.

International benchmark Brent crude futures for August were last seen 5.16% lower at $82.82 a barrel. U.S. West Texas Intermediate futures for July dropped 5.61% to $80.03 per barrel on Monday, its lowest level since March.

Brent crude.

But Hynes warned that $80 will not be enough to rebalance the market over the next three to six months, adding that prices are likely to hover around the "low $90s" into the third quarter.

"The market is oversimplifying things," he said. "Iran's control over the Strait will essentially be an ongoing issue that the market will have to deal with. That will keep prices relatively elevated... the oil market now faces a geopolitical risk premium."

Bart Melek, the global head of commodity strategy at TD Securities, told CNBC's "Squawk Box Asia" that, even if flows through the Strait of Hormuz normalized immediately, 800 million barrels of inventories into November would still likely be lost.

Higher oil prices are still "very much in the cards and all the inflationary implications that brings along," though some massive spikes in oil prices may be prevented if China chooses to stop drawing on its inventories at some point, Melek said.

"The market is quite relieved that we're having a deal, but I think we're not out of the woods yet," he added.

The economic effects from the Middle East conflict have already begun to have an impact on the most vulnerable parts of the economy, Global Chief Investment Officer at HSBC Private Bank and Premier Wealth Willem Sels said on CNBC's "Squawk Box Asia."

Sels added that "challenging economic data, especially from countries in South Asia," could cause more volatility.