Brent crude ended May down nearly 19 percent, recording its steepest monthly decline since the Covid-19 pandemic, as ceasefire negotiations between the United States and Iran raised expectations of an eventual Strait of Hormuz reopening. The benchmark rebounded sharply on June 1 as those talks showed fresh signs of fracture, underscoring the price volatility that has defined global energy markets since hostilities began on February 28, 2026.
Key Facts At A Glance
- Brent crude closed May 29 at approximately $92.56 per barrel, down nearly 19 percent for the month, its worst monthly performance since 2020
- The benchmark had reached an intraday peak of $138 per barrel on April 7, following the de facto closure of the Strait of Hormuz
- On June 1, Brent surged more than 5 percent to trade above $95 per barrel after Iran suspended communications with Washington and threatened to fully close the strait
- The US and Iran were reported to have “mostly agreed” to a 60-day memorandum of understanding, though President Trump had not yet approved the terms and Iranian state media said it was not finalized
- The EIA’s May Short-Term Energy Outlook projected Brent averaging $106 per barrel in May and June, declining to $89 per barrel in the fourth quarter of 2026 and $79 per barrel in 2027
- Saudi Aramco Chief Executive Amin Nasser warned that if the Strait of Hormuz remains blocked beyond mid-June, oil market normalization will extend into 2027
- Analysts cited infrastructure damage, mine-clearing requirements, and shipping security constraints as factors that will slow any resumption of full commercial traffic even after a ceasefire is formalized
A Collapse Built On Diplomatic Hope
For most of May, oil markets moved on a single variable: the probability that the United States and Iran would reach a durable agreement to end hostilities and reopen the Strait of Hormuz. As that probability rose through mid-to-late May, Brent retreated from triple-digit territory, falling nearly 19 percent across the month. The sell-off was among the fastest and largest sustained price declines in years, reflecting how much of the prevailing $130-plus price had been built on a war premium rather than physical scarcity alone.
The stated framework was a 60-day memorandum of understanding, reported in the final days of May, under which both sides would pause hostilities and Iran would commit to clearing mines from the strait within 30 days. Markets treated the report as a near-certainty for several trading sessions. Brent dropped below $91 per barrel on May 29, trading at levels last seen before the sharpest phase of the supply shock.
The Rebound And What It Reveals
The recovery on June 1 was instructive. Brent surged more than 5 percent to trade above $95 per barrel after Iranian state media reported that Tehran had suspended the exchange of messages with Washington, citing mixed signals from the US side and continued Israeli military operations in Lebanon. Iran’s foreign ministry stopped short of a full breakdown, and President Trump stated separately that talks would “work out well,” but the episode demonstrated the fragility of market confidence in any near-term resolution.
Maritime intelligence firm Windward had noted as early as April 10 that even after the initial ceasefire announcement, the Strait of Hormuz remained under selective enforcement by the Islamic Revolutionary Guard Corps, with no return to open commercial navigation. That assessment remained operative as of the first trading day of June.
Infrastructure Damage As A Structural Constraint
Even in a scenario where a binding ceasefire is formalized and the Strait is officially reopened, analysts and industry executives have identified a multi-month lag before physical supply flows normalize. Saudi Aramco’s Nasser told investors on the company’s first-quarter earnings call that if the strait opens immediately, it will still take months for the market to rebalance; a delay of several additional weeks pushes normalization into 2027.
The structural damage to Gulf energy infrastructure compounds this timeline. Saudi Arabia disclosed a reduction of approximately 600,000 barrels per day in production capacity following attacks on energy facilities. A major pipeline designed to bypass the strait was also struck. Recovery of shut-in production, repair of offshore infrastructure, and restoration of marine insurance coverage for commercial tanker traffic each operate on independent timelines that do not automatically accelerate upon a political agreement.
EIA Outlook And The Recovery Curve
The US Energy Information Administration’s May Short-Term Energy Outlook provided the clearest official projection of the price trajectory. The agency forecast global oil inventories falling by an average of 8.5 million barrels per day in the second quarter of 2026, keeping Brent near $106 per barrel in May and June. As Middle East production rises, EIA projected Brent declining to $89 per barrel in the fourth quarter and $79 per barrel through 2027.
The EIA’s price path assumes that the Strait of Hormuz remained effectively closed through late May, with flows beginning to resume in late May or early June. Even after resumption, the agency expected it would take until late 2026 or early 2027 for most pre-conflict production and trade patterns to restore. The UAE’s formal departure from OPEC on May 1, incorporated in the May STEO, also revised the body’s spare capacity estimate downward to 2.5 million barrels per day in 2027 from 3.8 million barrels per day, further narrowing the global buffer against future supply disruptions.
Southeast Asia’s Exposure
The EIA and IEA had flagged before the conflict that approximately 84 percent of crude oil and 83 percent of LNG transiting the Strait of Hormuz in 2024 was bound for Asian markets, with Southeast Asia sourcing roughly 60 percent of oil imports from the Middle East. The May price reversal offered partial relief to fuel importers, procurement agencies, and electricity regulators across the region after months of elevated generation and transport costs. Whether that relief persists depends entirely on whether the diplomatic framework holds — a question the June 1 market session answered with a 5 percent surge in the opposite direction.