Oil Sheds Almost 10% in a Week on a Ceasefire Nobody Signed

Brent crude is heading for its worst week in two months, sliding almost 10% to around $91 a barrel as oil traders bet that a 60-day US-Iran ceasefire extension will de-mine and reopen the Strait of Hormuz. The global benchmark has now shed close to a fifth of its value from the 2026 war peak, and May is shaping up as the heaviest monthly loss since the pandemic year of 2020. For oil importers staring down triple-digit crude six weeks ago, $91 feels like deliverance.

It is also a price built on a document that has not been signed, sealing a war that is not over. President Donald Trump has yet to approve the memorandum, Iranian state media says the text is not final, and the physical barrels lost to the conflict have not come back. The screen is falling faster than the supply picture justifies.

Why Brent Shed Almost 10% in Five Trading Days

The selling kicked off the moment wire reports described a 60-day truce extension and a temporary Hormuz navigation deal as close to done. ICE Brent dropped to roughly $91.2 on Friday, a six-week low, capping a week of near-relentless declines. West Texas Intermediate, the US benchmark, slid in lockstep.

Zoom out and the move looks even larger. Crude is down close to 20% from the levels it hit in March, when the closure of the world’s busiest oil chokepoint pushed Brent to a peak of $126 a barrel and Dubai crude to a record above $160. March logged the largest one-month jump in oil prices on record. May is now erasing much of it.

Here is the speed of the reversal in four figures:

• Almost 10% wiped off Brent in a single week, the steepest weekly slide since March.
• Around 19% lost across May, the worst calendar month for oil since 2020.
• $126 the March intraday peak, four years after Brent last cleared $100.
• $91.2 Friday’s settle, the lowest in roughly six weeks.

The rally that took crude to $126 was a fear trade. The collapse back toward $91 is a hope trade. Neither is the same thing as a barrel changing hands.

The Ceasefire Traders Priced Still Lacks a Signature

What markets have actually bought this week is a framework, not a peace. Negotiators are understood to have mostly agreed on a 60-day memorandum of understanding that would extend the current ceasefire and start talks over Iran’s nuclear program, with the Strait of Hormuz de-mined and reopened in the meantime. That is the structure. The signatures are missing.

Three conditions still stand between the headline and a single extra barrel of supply:

• Trump has not approved the deal, and the White House has set no timetable for him to do so.
• Iranian state media insists the text has not been finalized, leaving room for terms to shift or collapse.
• The shooting has not stopped. Iranian forces fired ballistic missiles at Kuwait on Thursday and sent attack drones toward the strait even as diplomats talked.

Oil markets have run ahead of this kind of optimism before. Earlier in May, crude slid on the first reports of US-Iran talks and a Hormuz arrangement, only to find that vessel traffic through the strait barely moved. A memorandum that two principals have not endorsed is a thin foundation for a 10% repricing of the world’s most-traded commodity.

The gap between paper and pavement is the whole story. Until Trump signs and the mines come out of the water, the ceasefire trade is a wager on intent, not on flows.

The Barrels Still Missing From the Market

While screens price relief, the physical market is still short. Several large chunks of supply that vanished during the war have not returned, and at least one new outage landed this week. Importers buying the dip are buying into a market that is tighter than $91 suggests.

Kazakhstan’s Tengiz Outage

Production at Kazakhstan’s largest oil field, the Chevron-operated Tengiz, fell sharply on May 26 after an undisclosed accident. Output reportedly plunged from about 950,000 barrels a day to just 60,000, knocking out close to 900,000 barrels of daily supply from a single site. That is a meaningful hole in a market betting on more crude, not less, and it has nothing to do with Iran.

Japan’s Import Cliff

Demand destruction is showing up in the trade data. Japan’s crude imports plummeted 66% from a year earlier to just 850,000 barrels a day, the smallest monthly volume since 1967, according to figures from the country’s Ministry of Economy, Trade and Industry. Middle East flows to Asia have not so much slowed as dissipated.

Inventories Draining at Record Pace

Stockpiles tell the same story. Global oil inventories have been drawing down at a record pace as Asian tanks hit minimum operating levels, leaving little cushion if the ceasefire slips. A market running on fumes does not need much bad news to snap higher.

None of these lines reverse the day a memorandum is initialed. Fields restart slowly, demand re-routes slowly, and tanks refill slowly.

Hormuz Reopening Remains a Plan on Paper

The strait is the hinge of the entire trade. About 20% of the world’s seaborne oil and a similar share of its liquefied natural gas normally pass through Hormuz, roughly 20 million barrels a day, according to the US Energy Information Administration’s analysis of the Hormuz chokepoint. During the war that flow dropped 70% and then approached zero.

Reopening it is not a switch. The waterway has to be de-mined, insurers have to re-underwrite the risk, and tanker owners have to be willing to sail crews back into a zone where missiles were flying on Thursday. That process takes weeks under the best conditions, and the best conditions do not yet exist.

There is still little evidence of any short-term improvement in vessel traffic or energy flows through the region.

That assessment came from UBS, the Swiss bank, whose analysts have warned clients against trying to trade the geopolitics of this conflict. Their point is blunt: the chart is moving on expectation, while the actual ships are not yet moving at all.

Washington Is Tightening Sanctions, Not Easing Them

For a market pricing reconciliation, US policy is pointing the other way. Even as ceasefire chatter built, the Treasury Department tightened the screws on Iran’s oil trade, adding 8 tankers and 15 commercial entities based in Hong Kong and the UAE to its sanctions list. The designations are part of an enforcement push the administration has branded its maximum-pressure campaign against Tehran’s energy revenue.

Treasury Secretary Scott Bessent has framed the broader effort as choking off the cash Iran earns through global energy markets, and Washington has warned Chinese independent refiners that continued purchases expose them to secondary sanctions. The full set of designations sits on the Office of Foreign Assets Control’s Iran sanctions program page. None of this looks like a government about to let Iranian barrels flood back.

The supply squeeze is widening elsewhere, too. Brazil’s oil exports are set to halve in May from a year earlier after Brasilia slapped a 12% export tax on crude two months ago, pulling another stream of barrels off the water. The relief priced into Brent assumes the pipes are about to open. The policy signals say several of them are closing.

What a Collapsed Deal Does to $92 Brent

Strip away the hope, and the low-$90s still carries what analysts call a clear risk premium. Crude has not fallen to where it would trade if the war were truly settled, which tells you the market itself is hedging its own optimism. The second weekly decline in a row is a bet on resolution, not a verdict that resolution has arrived.

Saudi Arabia is expected to cut its official selling prices again for buyers in Asia, a sign the kingdom is fighting for market share rather than defending the spike. That points lower. The missing Tengiz barrels, the record inventory draws, and the unsigned memorandum all point higher. Between those forces, $91 is less a settled price than a coin spinning on its edge.

If Trump signs the memorandum and the de-mining of Hormuz actually begins, the risk premium bleeds out and crude has room to fall further toward the $80s. If he balks, or the Thursday-style strikes harden into a fresh round of fighting, the same thin, inventory-starved market that ran to $126 in March will not need long to remember the way back.