Brent crude has lost almost 20% year-to-date in May 2026. But a tenuous ceasefire, a reopened strait, a crumbling cartel and an energy world that could never be the same are behind the collapse.

The previous instance of such massive bleeding in global oil markets was in the initial weeks of the COVID-19 pandemic in 2020. At the time it was due to ‘demand destruction’ on an almost biblical scale, with planes grounded, factories closed and roads empty. This time, it's a different reason: it's the sudden and messy supply returning to a world that had braced itself for the worst supply shock in living memory for two months.

Brent crude was trading just above $91 a barrel on Friday, 29 May, having risen from $93.71 on Thursday, and up almost 19% from the May opening. West Texas Intermediate has finished only 16.5% higher month-to-date at about $87 a barrel. The week's biggest leg plunge was spurred by a Reuters report that the U.S. and Iran have reached a 60-day memorandum of understanding to extend the ceasefire and take the first steps to ease restrictions on shipping through the Strait of Hormuz, a report that was rejected, then partially confirmed, and ultimately left tantalizingly unresolved.

How We Got Here: The Hormuz Shock that Rewrote Every Model.

The backstory matters. At the end of February, 2026, hostilities between the United States, Israel and Iran escalated, culminating in the near complete closure of the Strait of Hormuz, through which around one-fifth of the world's oil and LNG supplies pass according to the International Energy Agency's Oil Market Report for May. In a matter of days, the price of crude oil had reached the $80s. It surpassed $100 in only weeks. It rose to $138 per barrel in the first week of April, the highest since shortly after the peak of the Russia-Ukraine war during the first week of 2022.

The figures from this time are still astounding. In May, the EIA forecast 10.5 million barrels per day of crude shut-ins in April alone for Iraq, Saudi Arabia, Kuwait, the UAE, Qatar and Bahrain. Meanwhile, the IEA estimated that the total loss of supply from the Gulf producers was more than one billion barrels, and described it as "an unprecedented supply shock. World oil stocks were being depleted at an unprecedented rate. The fluctuation in the benchmark price was as high as six dollars per session, based on whether a diplomat was interviewed optimistically or whether a tanker was threatened in the strait.

“Even if the Strait of Hormuz is opened, it will be only part of the way, there's still a lot of damage to infrastructure, to refineries and pipelines throughout the Gulf, and then there's still the security issue of tanker traffic.” — Oil analyst, CNBC Squawk Box, Europe, May 30, 2026

The next part is as old as the concept of oil markets itself: the fear premium ramped up even faster than the physical destruction, and once some inkling of a resolution seemed possible, the balloon deflated at warp speed. A two week ceasefire was declared in early April. Brent closed down almost 13% in a single day, the biggest drop it has seen since 2020. Prices picked up a little when it was obvious that the strait was still effectively shut and the ceasefire was tenuous, but the message had been sent.

May's Relentless Grind Lower

Erosion has been happening just about every day this month in May. There were new indications each week that a permanent deal was moving closer. Trump also shared on Truth Social that talks were "proceeding nicely. Sources close to the talks said a 60-day framework was being put into place. Iranian authorities, in turn, indicated interest in permitting commercial vessels to pass as long as the military is involved. It was all conditional and hedged, but it was sufficient to keep traders who had been long oil at higher prices from selling.

The question now is: What's Driving the Oil Price Down — Weight of Factors

Based on analyst estimates, the sell-off for May 2026 is estimated at consensus.

India, one of the world's three biggest crude importers, was already experiencing the whiplash effect in the other direction by mid-May. The price of petrol in Indian cities had been raised in a sharp manner in the first half of the month to compensate for losses incurred by Oil Marketing Companies. Delhi motorists awoke on 15 May to discover that the price of petrol had shot past ₹100 per litre, and diesel was not too far behind. Under-recovery figures had become alarming: some estimates had pointed out that at the higher crude oil prices in April, the state-owned OMCs were losing ₹18 per litre on petrol and ₹35 per litre on diesel. The rupee's devaluation against the dollar, which India imports crude oil in, worsened the loss. India imports approximately 85% of its crude needs and the scope for error is limited either way.

India's oil math, May 2026: Petrol in Mumbai hit ₹111.18/litre by May 29. Losses for OMC were said to be ₹18/litre on petrol and ₹35/litre on diesel at $138/bbl crude price. India's current account deficit is estimated to decrease by 40-50 basis points for a $10/bbl decline in crude oil prices. Meanwhile, a continued retreat to $80/bbl Brent could save the CAD 60-80 basis points and provide real relief on the inflation front, although the timing of the pass-through is unclear due to political pricing.

The irony is that the very same decline in prices that is helping importing countries such as India, Japan, South Korea and much of Europe is causing major strain on the budgets of the very same Gulf states whose infrastructure was impacted by the conflict. Saudi Arabia, already having slashed about 600,000 bpd of production capacity in response to attacks on energy facilities, requires Brent to be well above $80, and according to some fiscal breakeven estimates closer to $95, to balance the budget. Riyadh is seeing its assumptions for financing Vision 2030 melt away before its eyes at $91 and counting.

Shrinking Room for Manoeuvre" is the title of OPEC's.

It's not as simple as it appears to the outside eye. OPEC+, at its inaugural official meeting following the UAE's exit from the organization's official calculations, took the decision to raise production rates by 188,000 bpd. The markets have coped with it well, but US crude futures did slide 3% on the day, closing at around $101 per barrel. The bigger one wasn't in the official statement, but in the traders' reading between the lines: five OPEC+ sources indicated that if compliance problems of members such as Iraq and Kazakhstan continued, further increases of 411,000 bpd in August, September and October were possible.

Brent Price Forecasts for Late 2026: Big Banks vs Reality.

The consensus price pre-conflict (January 2026) versus the post-ceasefire scenario ($/bbl).

Pre-conflict forecast

Post-ceasefire scenario

Bear scenario (Goldman)

Goldman Sachs has been warning for months about the potential downside to the oil price, with a note in advance of the conflict predicting $60 for Brent and $56 for WTI in 2025, as the market is dominated by “high spare capacity and high recession risk.” A potential upside scenario cited in the same note suggests that the 2.2 million bpd of voluntary production reductions could be completely reversed with monthly increases, potentially pushing Brent to the high $40s later this year. The research desk at J.P. Morgan had its base case at $60 for the 2026 average, before the Hormuz crisis a figure that seems like a picnic in comparison to what's happened in the first four months of the year, but has become a bit less pie in the sky at least for the second half, as long as the deal is real.

Citing its base case, the IEA surveying the wreckage noted in its May projection that "assuming the deal for Hormuz is confirmed, flows will gradually pick up from the third quarter, at least, encouraging demand to swing back toward growth toward the end of the year. Supply will take longer to bounce back, though. Until at least late in 2026, the market will be in deficit due to damage to infrastructure in the Gulf producer nations, security restrictions on tanker transport, and a reduction in inventories. Volatilisation of prices, the agency said, seems to likely occur “in anticipation of the maximum demand of the summer period” no matter the outcome of the talks.

While not a closed deal yet, this is an agreement that involves a great deal of money.

The diplomatic situation was still murky as of Friday evening. A memorandum of understanding reported by CNBC and Reuters that was supposed to be in effect for 60 days was not confirmed. However, Trump had not signed off. The reports were premature, Iranian state media said. But the market's response Brent slipped another 1.2 percent on Friday to $92.56 at mid-session indicates traders have already taken the measure that the worst of the conflict is over. As sums it up IG analyst Tony Sycamore, consensus is that the conflict is basically over and a deal is imminent, and while that view persists, crude can keep on its downward trend towards trendline support in the $80s.

Not all are sharing the euphoric sentiment. One of the veteran energy traders who spoke to CNBC's Squawk Box Europe was firm in his opinion: “Iran will be running the show in the Strait of Hormuz for the foreseeable future, whatever is written on paper.” Even if a complete diplomatic solution is reached, there is the reality of damaged pipelines, curtailed Saudi production and ships waiting to clear for insurance, which means that a full return to pre-February supply flows is not an immediate possibility. “If the Strait of Hormuz is opened it will be partial,” he said. It will take months, not weeks, to repair structural damage to Gulf energy infrastructure.

Interpretation of the numbers for the remainder of 2026.

The EIA's base case, released on 12 May, calls for the world's oil inventories to decline by a record 8.5 million b/d through the second quarter of 2026, keeping Brent close to $106 in May and June, followed by a slowdown in the rate of decline as Middle Eastern output increases. The agency forecasts a fourth quarter average price of $89 for Brent then a $79 average in 2027 as output returns to normal levels. That path assumes that the reopening of the Hormuz is slow, starting from the end of June and reaching a meaningful level of shipping activity by the third quarter.

In India, the numbers are working in favour in an arithmetic sense, though the path to retail prices is more of a pass-through process that is politically managed, and is proceeding slower than one might like. Each $10 drop in crude oil prices from the April peak saves the nation's oil import bill about $15 billion a year. That the price of Brent may be heading back to the $80 level, as now appears to be a distinct possibility over the next 3-6 months, would essentially bring the fiscal calculus back to pre-crisis levels, allowing the Reserve Bank of India to maintain a more accommodating stance and the OMCs to unwind the losses built up during the worst of the price spike. As with all else, it's the rupee — this is a softer landing if the dollar keeps strengthening.

But for the world economy at large, a gradual return to $80–90 in the price of oil takes away one of the most important inflationary risks the world has faced over the past 10 years. The Federal Reserve, which lowered rates three times in 2025 partly due to the downward pressures on prices from cheap oil, now has a more complicated picture: not only does the geopolitical risk premium appear to be fading, but the effects of the supply shock on energy infrastructure costs and LNG contracts will remain in corporate cost structures long after the headlines have shifted. European manufacturers, already under pressure from the capital needs of the energy transition, will welcome this, but shipping and logistics costs via other routes – the Red Sea, the Cape of Good Hope are still high.

The fundamental question no one wants to ask is the structure question.

Beneath all this lies a more serious and disquieting question: Can any ceasefire, no matter how lasting, fix the world's reliance on a 21-mile-wide choke point for 20% of its daily energy needs? The situation in the Hormuz strait has not been the first time that it has become part of oil market risk models, nor will it be the last. The difference is that the world was experiencing a period of about 18 months of excess supply pre-conflict, and strong non-OPEC supply growth, from the United States, Brazil, Guyana and Argentina, helped absorb the shock. The buffer in inventory that was built up prior to February provided time. If not, then the rise to $138 might have been a bottom and not a top.

Meanwhile, the OPEC+ bloc comes out of this crisis in a structurally weaker position than they were when it began. The UAE's exit takes a big counterweight and a welcome dose of extra capacity out of the official calculation of the cartel. However, the fact that the group has been managing prices higher in the face of declining demand – IEA forecast global demand growth of just 1.1M bpd for 2025 is hampered by the dual issues of non-compliance by members and the seemingly unstoppable rise in non-OPEC supply. The dilemma of the arithmetic versus price management has not disappeared that has plagued Riyadh since 2014. In fact, the Hormuz episode has demonstrated that geopolitical shocks can do what the cartel can't provide support to the price but only for a short time, and very expensively, for the region in which the oil is hosted.

So what do we have? Brent near $90 and ticking, a deal that's almost but not quite done, producers reaping the price of damage to their infrastructure, importers anticipating the next move, and analysts lined up between the Goldman bear case of the $40s and the EIA base case of eight-nine by year-end. For the last three months, the oil market has been the most dynamic tale in global finance. The next one quieter, slower, more structural is likely to be more significant in the long run.