Oil prices are heading for their largest monthly decline since the outbreak of the Iran conflict as investors increasingly bet on a diplomatic breakthrough between Washington and Tehran that could lead to the reopening of the Strait of Hormuz.
Brent crude, the global benchmark, has fallen more than 19% during May, compared with a 3.6% decline in April, marking its steepest monthly drop since the height of the Covid-19 pandemic in May 2020.
The sell-off comes as negotiations between the US and Iran continue, raising hopes that shipping through the strategically important Strait of Hormuz could soon resume without disruption.
Despite the sharp pullback, oil prices remain significantly above pre-conflict levels. Brent crude is currently trading around US$92 a barrel, compared with approximately US$70 before hostilities erupted in the Middle East. Prices had surged by as much as 63% during March as fears over supply disruptions intensified.
Meanwhile, US benchmark West Texas Intermediate is on course for its first monthly decline since the conflict began, falling around 16% during May to trade near US$87 a barrel.
Markets remain highly sensitive to developments in the region, with the outcome of US-Iran negotiations expected to play a key role in determining the direction of energy prices through the summer.
