KEY POINTS
- Brent crude closed May at $92.56 per barrel, down nearly 19% for the month — its worst monthly performance since the COVID-19 pandemic collapse.
- The U.S. and Iran reached a 60-day memorandum of understanding to extend their ceasefire and begin nuclear negotiations, raising hopes for an eventual reopening of the Strait of Hormuz.
- Analysts expect oil to remain range-bound between $90 and $100 for the next two months while geopolitical clarity develops.
Brent crude ended May at $92.56 per barrel after suffering its worst monthly decline since the pandemic-era wipeout, falling nearly 19% as the prospect of a lasting U.S.-Iran ceasefire reordered the global energy calculus. WTI crude settled below $88, down 16.2% for the month, and both benchmarks opened June trading under continued pressure as negotiators finalized the terms of a 60-day extension to the ceasefire.
The speed of the reversal has been remarkable. Just weeks ago, Brent was testing levels above $110 after Iran vowed to retaliate for U.S. strikes, sending crude jumping more than 3% in a single session on May 26. The Strait of Hormuz — the chokepoint through which roughly one-fifth of global oil and LNG flows — was functionally closed to commercial shipping for stretches of the conflict, and war-risk premiums had driven energy costs to levels that were visibly dragging on consumer spending and industrial activity.
The Deal That Changed Everything
The memorandum of understanding reached Friday calls for a 60-day ceasefire extension and the start of negotiations over Iran's nuclear program. President Trump still needs to formally approve the MOU, and Secretary of State Marco Rubio signaled the administration would give talks "every chance to succeed," a comment that alone knocked another 5% off oil prices when it landed on May 27.
For traders, the geopolitical risk premium that had been baked into crude is now unwinding at speed. The roughly $20 per barrel decline from peak to current levels represents the market repricing for a scenario in which Hormuz shipping lanes eventually reopen and Iranian barrels gradually return to the global supply pool. But analysts caution that "eventually" is doing a lot of work in that sentence. Physical supply disruptions take time to reverse, tanker insurance rates remain elevated, and the OPEC+ production framework has not yet adjusted for any resumption of Iranian exports.
The Ripple Effects Across Markets
The oil crash has been one of the most consequential macro developments of the year, and its effects extend well beyond energy stocks. Falling crude acts as a tax cut for consumers — gasoline prices had spiked above $4.50 per gallon in many U.S. markets during the Hormuz disruption and are now retreating. Airlines, trucking companies, and chemical manufacturers that had been squeezed by input costs are seeing immediate margin relief.
For equity markets, cheaper oil has been unambiguously bullish. The S&P 500's May rally coincided almost perfectly with the acceleration in crude's decline, and the correlation between falling oil and rising stocks has been tighter than at any point since late 2022.
Where Oil Goes From Here
The consensus range for the next two months is $90 to $100 for Brent, a wide band that reflects genuine uncertainty about the durability of the ceasefire. A breakdown in negotiations would snap prices back toward $110 almost immediately. A formal peace deal that reopens Hormuz and eventually lifts sanctions on Iranian oil could push Brent into the low $80s — a level that would be profoundly disinflationary and could even bring Fed rate cuts back onto the table.
The June 17 FOMC meeting and the next round of OPEC+ production discussions both arrive before the 60-day MOU window closes. Oil traders will be watching Trump's formal response to the deal, tanker traffic through the strait, and any OPEC+ signals on quotas. For now, the risk premium is out, but the geopolitical uncertainty is not.
