WTI Crude Tracks 16% May Loss as US-Iran Hormuz Ceasefire Extension Nears

West Texas Intermediate crude settled at $87.84 per barrel on Friday's CME close, down 16.40% for the month of May. Brent crude settled at $91.37 per barrel on the ICE, down 1.43% on the day. Both benchmarks fell as US and Iranian negotiators advanced a draft agreement to reopen the Strait of Hormuz, the waterway that handles roughly 20% of global oil and LNG trade.

Terms of the Draft Agreement

Under the proposed 60-day framework, the Strait of Hormuz would reopen to commercial shipping without tolls. Iran would clear mines it deployed in the strait while the United States lifted its blockade on Iranian ports and issued sanctions waivers allowing Iran to sell oil freely. President Donald Trump and Iran's Supreme Leader Mojtaba Khamenei have not yet given final approval, according to reporting by The Washington Post and Axios dated May 24, 2026.

The conflict began after US and Israeli-led military strikes on Iran on February 28, 2026, according to CNBC, triggering what Gulf states described as the worst global energy crisis in decades. A ceasefire took effect April 8, 2026, but recurring skirmishes over strait access kept oil markets on edge. On May 26, prices surged more than 3% after Iran threatened retaliation for new strikes before reversing as ceasefire talks resumed the following day.

The Math Behind the Monthly Drop

WTI opened May above $105 per barrel at the height of the Hormuz crisis, a level implied by TradingEconomics' reported 16.40% monthly decline from Friday's $87.84 settlement. That translates to a drop of $17.23 per barrel from the May 1 opening price. Applied against US petroleum product consumption of 20 million barrels per day as tracked by the EIA, the crude-cost reduction equates to $344 million per day for American refiners and consumers, if sustained into June.

Where Forecasters Disagree

Goldman Sachs raised its Q4 2026 Brent forecast to $90 per barrel, pushing back its expectation for full Hormuz normalisation to end-June from an earlier mid-May target. The bank cited 14.5 million barrels per day of Middle Eastern output losses as the driver of what it described as a record inventory drawdown during the crisis peak. Morgan Stanley's Q3 2026 Brent target stands at $100 per barrel. JPMorgan set its full-year 2026 Brent average at $96 per barrel, with full-year WTI averaging $89 per barrel.

Barclays raised its full-year 2026 Brent forecast to $100 per barrel, citing a supply deficit of 6.6 million barrels per day. That $10 spread between Goldman's Q4 Brent target of $90 and Morgan Stanley's Q3 target of $100 reflects uncertainty about how quickly Iranian exports restart and Gulf inventories rebuild after reopening. A structured 60-day framework implies gradual resumption rather than an immediate supply surge, which supports prices above Goldman's scenario.

Inventory Data Provides a Counterweight

The American Petroleum Institute estimated US crude inventories fell by 2.8 million barrels in the week ending May 22. That draw, pending confirmation by the EIA's weekly petroleum status report, indicates firm underlying demand even as the geopolitical risk premium drains from prices. Inventory draws of that scale typically support a price floor, limiting downside if the ceasefire deal stalls before final approval.