Oil prices fell as the US and Iran tentatively agreed to extend a ceasefire by 60 days, leading to expectations that shipping through the Strait of Hormuz could resume. Brent crude is on track for its largest monthly decline since 2020, dropping nearly 19% to around $92 a barrel, while West Texas Intermediate fell below $88. President Donald Trump has yet to sign off on the agreement’s terms, after Axios reported that shipping through the strait would be “unrestricted.”
Despite this tentative progress, Vice President JD Vance stated to reporters that it remains too early to determine whether a deal with Iran will be finalized. Earlier, Treasury Secretary Scott Bessent indicated that negotiations were ongoing, stating, “the teams have been going back and forth,” but did not confirm if an interim agreement had been achieved.
Crude oil prices have weakened this May amid speculation about the possibility of an accord, although previous reports of progress from both sides have often led to prolonged stalemates. The closure of the Strait of Hormuz, affected by blockades from both Washington and Tehran, has triggered a global energy crisis, resulting in the suspension of millions of barrels daily.
Aaron Stein, president of the Foreign Policy Research Institute, remarked, “We’re slowly and excruciatingly pulling toward what is being framed as a deal.” He noted that if the current situation is merely an extension of the ceasefire, it does not fundamentally alter the status quo. However, he mentioned there appears to be a consensus on a reciprocal lifting of blockades between the two nations.
Crucial sticking points in the negotiations include Iran’s nuclear program, its control over the Strait of Hormuz, and the subject of sanctions relief. Treasury Secretary Bessent emphasized that the reopening of the waterway and Iran’s transition from possessing highly enriched uranium are crucial “red lines” for any actionable agreement.
Even if a ceasefire extension is agreed upon, several challenges could hinder the resumption of oil flows. Key obstacles include the need to clear mines in the Hormuz waterway, the time required to restart shut-in production fields, and repairing damage caused by drone and missile strikes on energy infrastructure. Additionally, vessels could take weeks to reach importing countries.
Ryan McKay, senior commodity strategist at TD Securities, noted, “I would expect flows to remain heavily constrained due to the time lag of tanker travel and the time to get production back online.” He warned that an additional 1 billion barrels of supply could be lost during the “recovery” period.
Recent data indicated tightening conditions in the US as the crisis continues. Distillate stockpiles fell to their lowest point in over two decades, while crude oil holdings at the Cushing, Oklahoma hub declined for the fifth consecutive week to 23 million barrels, nearing the 20-million-barrel threshold typically considered the minimum operating level.
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Published on May 29, 2026.
