Oil Posts Its Worst Month Since 2020 as Traders Bet on a Ceasefire That Is Not Yet Signed

Crude oil fell sharply in May, a decline driven less by events in the region than by what traders expect to happen next. Brent crude, the global benchmark, dropped about 19 percent over the month and settled near $92.56 a barrel, with United States West Texas Intermediate around $88.90.

The decline rested on an expectation. The United States and Iran are reported to have mostly agreed on a 60-day memorandum that would pause hostilities and reopen shipping through the Strait of Hormuz, the channel that carries roughly a fifth of the world's seaborne oil. Yet the fighting has not stopped. Both governments traded new attacks over the weekend, and President Donald Trump sent Tehran a tougher peace proposal even as Israeli operations widened in Lebanon. A ceasefire that took effect on April 8 has largely not held in practice.

The gap between the price and the situation on the ground narrowed at the start of June. After the United States struck command-and-control sites near the Strait of Hormuz and Kuwait reported incoming missiles and drones, Brent rose more than 5 percent on June 1 to about $95.94 a barrel, reversing part of May's decline. The episode showed how quickly a market pricing in a diplomatic outcome that no party has signed can move back toward the physical disruption that continues. Across Southeast Asia, airlines and tour operators report higher fuel costs and thinner bookings tied to the conflict, a reminder that businesses still bear higher costs from the war regardless of where the market price settles on a given day.