Sunday, May 31, 2026 · 12:23 AM
Brent crude fell about 2% to $91.2 per barrel on Friday, down 17% in May, the worst monthly decline since 2020. The move followed reports that the US and Iran have reached a preliminary agreement to extend a ceasefire and ease restrictions on shipping through the Strait of Hormuz, although President Donald Trump has not yet approved the deal and Iranian state media said it has not been finalized. The market is pricing in a peace that does not exist based on a memorandum of understanding that neither side agrees on the contents of. This is what passes for price discovery in May 2026.
Shipping traffic through the Strait of Hormuz has been largely blocked by Iran since 28 February 2026, when the United States and Israel launched an air war against Iran and assassinated its supreme leader, Ali Khamenei. Until the war, about 25% of the world's seaborne oil trade and 20% of the world's liquefied natural gas passed through it. For three months the most important energy chokepoint on Earth has been effectively closed. Now the market is celebrating a deal that Trump held a two-hour Situation Room meeting about on Friday and walked out without announcing a decision.
Iranian state news outlet Fars pushed back on Trump's post, saying it "raised issues that contradict the provisions of the agreement's text". Fars asserted that "the most important part of the agreement" is "the immediate payment of $12 billion of Iran's frozen assets" and Iran will refuse any further negotiations unless that payment is made. Trump says no money will be exchanged. Iran says the $12 billion is the deal. The gap between these positions is not a rounding error. It is the entire structure of what each side thinks has been agreed to.
US Central Command confirmed that Iran fired a ballistic missile toward Kuwait overnight, which was intercepted. Last night, the US military carried out what it called "self-defense strikes" targeting Iranian missile launch sites and boats around the Strait of Hormuz. This is what the ceasefire looks like while it holds. The shooting continues. The mines remain. The report stated that Iran would clear all mines from the waterway within 30 days, but Iran has not confirmed this and the US Navy has been detonating them manually because there are so many.
Bessent said there are almost 2,000 ships waiting to come out of the Gulf. When Hormuz reopens the physical flow will take weeks to normalize. Mines need clearing. Damaged infrastructure needs repair. Shut-in production needs restarting. Tanker insurance needs repricing. Analysts warn that any recovery in flows would likely be slow, as mines would need clearing, damaged infrastructure repaired and shut-in production restarted, with tanker delays also limiting supply restoration. The market has decided none of this matters because a tentative memorandum of understanding that Trump has not signed and Iran disputes the terms of has been reached by negotiators working through Pakistan.
The US saw an increase in oil exports and a revenue increase of about $50 billion during the war, while Russia had an increase of more than $15 billion in revenue. The largest supply disruption in the history of the global oil market has been extraordinarily profitable for American producers and Russian exporters who have spent three months selling into a market where a fifth of global flows disappeared. Brent is now trading as if that windfall ends next week. It will not.
The agreement that may or may not exist and may or may not be approved involves a 60-day extension during which Iran and the US will negotiate what to do with Iran's highly enriched uranium. Iran has 440.9 kilograms of uranium that is enriched up to 60% purity, a short, technical step from weapons-grade levels of 90%. The idea that this gets resolved in 60 days while both sides continue launching strikes at each other is fantasy. The idea that Hormuz returns to normal shipping during those 60 days is a bigger fantasy. The idea that oil should be trading 17% lower because of this fantasy is the kind of dislocation that makes careers.
The market sold what it knows for certain—a closed Hormuz, 25% of seaborne oil trade offline, inventories draining, spare capacity exhausted—and bought what it hopes might happen based on leaks to Axios about a deal that Iran says contains provisions the US denies and the US says contains provisions Iran denies. Brent at $91 prices in a Hormuz that reopens smoothly, stays open, and returns to normal flows within weeks. None of that is real. The ceasefire violations are real. The 2,000 ships stuck in the Gulf are real. The mines are real. The $91 is not.