Oil slides nearly 20% from 2026 peak by late May on US-Iran ceasefire hopes

Oil prices ended May sharply lower, with Brent crude down roughly 19% over the month and about 20% off its 2026 highs, as investors grew more optimistic that a lasting ceasefire between the United States and Iran could eventually reopen the Strait of Hormuz. On the final trading day of May, Brent slipped around 1.2% to near $92.56 a barrel, capping a volatile stretch in which the war's twists repeatedly whipsawed energy markets.

The late-month retreat reflected reports that Washington and Tehran had largely agreed on a 60-day memorandum of understanding intended to pause hostilities, even as sporadic missile strikes continued in the Gulf. The prospect of a durable truce that would restore shipping through the strait, a chokepoint that handled roughly a fifth of global oil and liquefied natural gas before the conflict, was enough to pull the geopolitical risk premium out of prices that had surged earlier in the year.

The optimism followed a week of sharp swings. On May 26, Brent had jumped about 4% to roughly $100 a barrel after the US military carried out fresh strikes in Iran, reviving fears over the security of tanker traffic. Two days later, prices gave back ground, with Brent settling near $93.71, after Iran's state media claimed a draft understanding would reopen the strait to prewar shipping levels under joint Iranian and Omani management. The White House dismissed that account as a complete fabrication, and President Trump insisted no single nation would control passage through the waterway.

The diplomatic noise underscored how fragile the situation remained. Iran has effectively halted nearly all non-Iranian shipping through Hormuz since the war began in late February, choking off a substantial share of Middle East crude and forcing regional producers to curb output. Even as talks progressed, security analysts cautioned that Tehran retained de facto influence over the strait, and that any reopening would likely be partial and gradual rather than an immediate return to prewar flows.

Market strategists struck a similarly cautious note on the price outlook. Some suggested crude would likely trade in a range between roughly $90 and $100 for the following couple of months until there was greater clarity on a lasting agreement, pointing to lingering investor skepticism toward the negotiations. Others highlighted the significant damage inflicted on refineries, pipelines and other infrastructure across the Gulf during the conflict, along with depleted inventories, as factors that could keep supply tight even after a deal.

For all the month's volatility, the broader trend by the end of May was one of easing fear. Oil had surged dramatically in the early stages of the war, at one point rising roughly 50% from prewar levels as the conflict shuttered Hormuz and slashed regional production. The pullback over May represented a partial unwinding of that spike, as markets began to price in a scenario in which the worst-case supply disruptions might be avoided.

The decline carried important implications beyond the energy complex. Lower crude prices offered the prospect of some relief from the energy-driven inflation that had pushed consumer prices to multiyear highs and forced several central banks toward tighter policy. A sustained retreat in oil would, over time, ease the cost pressures rippling through fuel, transport and food, though economists warned that any improvement in headline inflation would lag the move in crude by weeks or months.

As the calendar turned to June, the central question for oil markets remained whether the tentative diplomatic progress would translate into a concrete and durable agreement. With the strait still largely closed and the ceasefire repeatedly tested, traders braced for further headline-driven swings, mindful that the same optimism that had pulled prices lower in late May could reverse quickly if the talks faltered.