Crude oil prices continued to fall as shipping traffic increased through the Strait of Hormuz following progress in U.S.-Iran peace plans [1, 2].
This shift reflects a broader move toward risk-off selling in global markets. As tensions ease between the two nations, traders are reducing their reliance on safe-haven assets and adjusting expectations for global energy supplies.
Reports indicate that the U.S. and Iran have "mostly agreed" to a 60-day memorandum of understanding designed to pause hostilities [7]. This agreement has fueled expectations that the critical shipping lane in the Strait of Hormuz will fully reopen, easing the supply bottlenecks that previously spiked costs.
The impact on the market has been significant. Oil prices fell about five% to a three-month low on Tuesday [4]. WTI crude oil closed down 2.71, a decrease of 2.81% [1], while July RBOB gasoline closed down 0.2046, falling 6.10% [1]. Some market data shows Brent crude reaching a 2.5-week low [1].
However, market movements have shown volatility. While many sources report a decline, other data indicates Brent crude futures climbed about four% on Tuesday [3]. This discrepancy follows reports of U.S. military strikes in Iran, which added a layer of uncertainty to the diplomatic progress.
Despite these fluctuations, the overall trend for the period remained bearish. Brent crude prices ended the month of May down almost 19% [5], with prices hovering around $92 per barrel [6]. This marks one of the worst monthly falls for the commodity since 2020 [6].
The decline in energy costs coincided with a drop in precious metals. Both gold and silver prices slipped as the perceived risk of a major regional conflict diminished [1, 2].
“The U.S. and Iran are said to have "mostly agreed" to a 60-day memorandum of understanding that would pause hostilities.”
The volatility in crude prices highlights the extreme sensitivity of global energy markets to the Strait of Hormuz, a primary artery for oil transit. While the 60-day memorandum suggests a diplomatic breakthrough, the conflicting reports of military strikes and sudden price spikes indicate that the market remains fragile. A sustained price drop depends on the successful implementation of the ceasefire and the permanent stabilization of shipping lanes.
