Global oil prices are experiencing their worst monthly decline in six years, with crude oil falling nearly 20% in May 2026 according to latest market data. Brent crude dropped around 19% in May, settling around $92-$93 per barrel, marking a retreat not seen since March 2020 during the COVID-19 pandemic. West Texas Intermediate (WTI) crude fell roughly 16.5% and traded near $87 per barrel by late May. This represents one of the biggest monthly corrections in recent years, offering significant relief to fuel-importing countries like India. Market data currently shows a 0.3% probability of crude oil reaching a new all-time high by May 31, down from 1% a week ago, indicating reduced expectations for further price increases. The sharp drop is already translating into lower gas prices across the United States, with the average price of unleaded gas falling 17 cents per gallon from this year's peak of $4.56 as of Friday morning, according to AAA data.
Goldman Sachs has revised its oil price forecasts upward significantly, with Brent crude now expected to average $90 per barrel in Q4 2026, up from a previous call of $80. WTI crude is projected to average $83, up from $75 in the same period. The bank's fourth-quarter Brent forecast is 'nearly $30 higher than before the Hormuz shock,' according to Goldman analysts led by Daan Struyven and Yulia Zhestkova Grigsby. The revision comes as roughly 14.5 million barrels per day of Middle East crude production has gone offline, with global inventories now drawing down at a record 11 to 12 million bpd pace in April. The supply-demand balance has swung dramatically, with what looked like a 1.8 million bpd surplus in 2025 now projected to flip to a 9.6 million bpd deficit by Q2 2026. However, Goldman analysts now see two-sided risks to oil prices as slump in demand competes with supply losses from the Middle East. April oil sales data from China and Western Europe jointly imply about 2 million barrels a day of downside risk to the bank's demand estimates, adding about $10 a barrel of downside risk to their forecast. The analysts note that actual end-use oil demand may have fallen more in response to higher prices than expected, with China's oil imports set to drop to levels not seen since the pandemic.
Reports suggest that the United States and Iran have reached a preliminary agreement to extend a ceasefire and relax restrictions on shipping through the Strait of Hormuz. The strategic waterway was effectively closed during heightened military tensions beginning February 28, 2026, which had been the dominant force pushing oil prices higher throughout early 2026, with Brent exceeding $114-$119 at its peak. The Strait of Hormuz, which handles approximately 20% of global oil flows, is one of the world's most important energy routes. While both sides indicated that an agreement may be near, their descriptions of the proposed deal continued to differ. U.S. President Donald Trump has not yet formally approved the proposed agreement, and U.S. Vice President JD Vance recently cautioned that it is still unclear whether a final deal with Iran can be reached and when it might be implemented. In May alone, Trump claimed in at least six social media posts that progress had been made toward a peace deal, with the president frequently stressing that Iran "wants to make a deal" and painting himself as the holdout.
Trading remained highly volatile this week, with both Brent and WTI swinging by as much as $6 on changing signals surrounding the possibility of the strait reopening. Geopolitical tensions escalated on Thursday after fresh U.S. strikes targeted an Iranian military facility overnight, despite ongoing diplomatic engagement between Washington and Tehran. Iran's Revolutionary Guards later claimed responsibility for a strike on a U.S. airbase, according to the semi-official Tasnim news agency. However, hopes that shipping activity could gradually return to normal have eased concerns about supply shortages, leading traders to reduce the geopolitical risk premium built into crude prices. The current market pricing reflects a 21.5% probability of crude oil reaching a new all-time high by September 30, suggesting continued cautious sentiment. Brent futures traded near $93 a barrel on Monday after closing at a six-week low on Friday amid optimism for a peace deal between the US and Iran. Despite the recent decline, energy industry leaders are warning that the oil market is on the verge of higher prices again, with commercial inventories of crude oil and petroleum products running down to backfill the millions of barrels per day that can't be shipped through the Strait of Hormuz. Chevron CEO Mike Wirth warned that even a reopening would not mean a clean restart, since rebuilding inventories and restarting shut-in wells takes months.
Saudi Aramco Chief Executive Officer Amin Nasser warned that disruptions in the Strait of Hormuz could postpone stability in global oil markets until 2027. He said nearly 100 million barrels of oil supply per week could be affected by continued disruptions. The dramatic price decline appears consistent with easing geopolitical tensions and speculation surrounding a potential Iran-related deal, which could lead to the reopening of the critical energy passage. However, analysts are cautioning that the relief rally in supply expectations may be premature, as lingering geopolitical risks and infrastructure damage in the region mean that full supply recovery is far from guaranteed. The Brent benchmark has rallied more than a quarter since the start of the conflict in late February, leading to demand destruction, especially for jet fuel and petrochemical feedstocks. For households, the practical impact is significant - the U.S. national average for regular gasoline sat at $4.02 a gallon as of April 23, up roughly 30% year-over-year, with California drivers paying close to $5.88 and Oklahoma drivers still paying around $3.27. Goldman Sachs notes that crude oil typically makes up about half the retail price of a gallon of gasoline, meaning that even if Brent settles near $90, gas prices could remain structurally above $4 for most of the summer driving season.
