KEY POINTS
- Brent crude futures climbed above $96 per barrel Monday as Iran launched missiles toward Israel over the weekend, raising doubts about the durability of the May 29 ceasefire framework.
- Oil has dropped roughly 20% from its March peak above $120 when Iran closed the Strait of Hormuz, but remains well above the $72 level that prevailed before the conflict began in late February.
- A proposed 60-day memorandum of understanding to extend the ceasefire and begin nuclear talks awaits President Trump's signature, making diplomatic developments the dominant price driver this week.
Brent crude futures pushed above $96 per barrel in early Monday trading, with WTI climbing past $93, after Iran fired multiple rounds of missiles toward Israel over the weekend in what Tehran called a warning against further military operations in Lebanon. Israel's military confirmed all incoming projectiles were intercepted with no casualties, but the exchange underscored just how fragile the ceasefire framework hammered out on May 29 remains.
From $72 to $120 and Back
The oil market has been on a wild ride since late February. Before the U.S.-Iran conflict erupted, Brent was trading around $72. Iran's closure of the Strait of Hormuz on March 4 — blocking roughly 20% of global oil supply — sent prices rocketing past $120, a 55% surge in less than a month. The International Energy Agency called it "the largest supply disruption in the history of the global oil market."
Since then, a combination of ceasefire diplomacy, strategic petroleum reserve releases, and rising output from non-OPEC producers has pulled prices back. Brent posted its biggest monthly loss in six years in May, tumbling from $111 to about $91 on optimism that a U.S.-Iran deal could reopen shipping lanes. But the weekend's escalation has reversed part of that retreat.
Diplomacy Is the Trade
The critical variable now is a 60-day memorandum of understanding negotiated between U.S. and Iranian diplomats that would extend the ceasefire and open talks on Iran's nuclear program. President Trump has yet to sign the MOU, and over the weekend he criticized Israeli strikes on Beirut while urging Prime Minister Netanyahu to avoid retaliatory action against Tehran. The contradictory signals from Washington are keeping traders guessing.
Energy analysts at Morgan Stanley noted in a recent research note that any confirmed reopening of the Strait of Hormuz would likely trigger an immediate $10 to $20 drop in crude prices due to speculative positioning. But supply chain bottlenecks, infrastructure damage, and lingering production outages would keep Brent anchored in the $80 to $90 range rather than returning to pre-crisis levels.
What It Means for Everything Else
Elevated oil prices are the thread connecting several of this week's biggest macro stories. April CPI showed energy prices up 17.9% year-over-year, the primary driver behind headline inflation accelerating to 3.8%. If Wednesday's May CPI report shows further acceleration toward the expected 4.2% annual rate, oil will be the culprit. That in turn makes it harder for the Fed to cut rates and easier for hawks to argue for a hike.
For equity traders, energy remains a double-edged sword. The S&P 500 energy sector has outperformed the broader index by 8 percentage points this year, but every spike in crude weighs on airlines, industrials, and consumer discretionary names. With Brent back above $96, the macro picture tilts more hawkish heading into a week where every basis point of inflation matters.
Watch the MOU. If Trump signs and Iran confirms, Brent likely retests $85 quickly. If the ceasefire collapses, $110 is back in play, and everything from CPI to Fed policy gets repriced.
