--- title: "US-Iran Deal 'Expectations' Crash Oil Prices; Investment Bank Warns of 'Severe Disconnect Between Market and Reality': Severe Pressure Expected in June-August" type: "News" locale: "en" url: "https://longbridge.com/en/news/288134544.md" description: "Market optimism driven by US-Iran negotiations and Trump's conditions for reopening the Strait of Hormuz pushed Brent crude down more than 16% in May. Royal Bank of Canada (RBC) warns that the market is engaged in 'Memento'-style trading, ignoring persistent stalemates and military conflicts. RBC points out that global inventories are being depleted at a record pace and are expected to fall to historically dangerous lows by October, subjecting the crude oil market to a severe supply-demand stress test from June to August" datetime: "2026-05-30T05:41:02.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/288134544.md) - [en](https://longbridge.com/en/news/288134544.md) - [zh-HK](https://longbridge.com/zh-HK/news/288134544.md) --- # US-Iran Deal 'Expectations' Crash Oil Prices; Investment Bank Warns of 'Severe Disconnect Between Market and Reality': Severe Pressure Expected in June-August Brent crude recorded its largest single-month drop in six years in May, as the market bet that US-Iran negotiations would lead to the reopening of the Strait of Hormuz, driving oil prices lower. However, Helima Croft, Head of Commodity Research at Royal Bank of Canada (RBC), issued a warning in her latest report: there is now a serious divergence between current oil price trends and supply realities. Global inventories are being depleted at a record pace, and if the situation fails to achieve a substantive breakthrough, the crude oil market will face a severe stress test from June to August this year. According to Xinhua News Agency, Trump stated on social media on Friday, the 29th local time, that he was about to hold a meeting in the White House Situation Room to make a final decision regarding the war with Iran. The news further dampened market sentiment. WTI crude fell 1.73% on the day to close at $87.36 per barrel; Brent crude dropped 1.77% to close at $92.05. For the full month of May, Brent crude accumulated a decline of over 19%, marking its worst single-month performance since the COVID-19 pandemic shocked the global economy in March 2020; WTI fell nearly 17% in May, recording its worst monthly performance since April 2025. **However, Trump simultaneously listed a series of conditions that Tehran has historically refused to accept:** Iran must commit to never possessing nuclear weapons, immediately and unconditionally open the Strait of Hormuz to two-way traffic without charging tolls, clear all remaining mines from the strait, and allow the US side to excavate and destroy enriched uranium buried in rubble after air strikes. According to CNBC, citing US officials, negotiators have reached a framework for a 60-day memorandum of understanding (MOU) covering an extension of the ceasefire and arrangements for negotiations on Iran's nuclear program, but it still requires Trump's final signature. Croft wrote in the report that she does not rule out the eventual formation of some form of MOU, but "in terms of a substantive agreement, current headlines and their impact on oil prices are clearly running ahead of reality." She reminded investors that reports of an "imminent deal" have appeared multiple times before—more than three weeks have passed since the first related news broke, during which Iran has cumulatively lost nearly 300 million barrels of production capacity. In her view, the market is repeatedly persuaded by news that "the situation is ending," abandoning pricing for the worst-case scenario, while selectively forgetting the ongoing diplomatic stalemate and escalating military conflicts. This is the fundamental reason why the true crisis has been concealed until now. ## Market Engaged in 'Memento'-Style Trading, Deal Narrative Overpowers Reality Croft described the current market trading logic in the report as a "Memento" mindset— **whenever news of an "imminent deal" emerges, the market treats it as a decisive breakthrough, yet selectively forgets the persistent diplomatic stalemate, fundamental disagreements on nuclear issues, and the repeatedly escalating military friction between both sides.** This pattern has replayed again this week. Just hours after the latest round of oil price declines driven by Axios reports, new reports emerged that Iran had again fired missiles at several vessels that had not coordinated passage with the IRGC. On Thursday, the US military intercepted four Iranian drones in the Strait of Hormuz and launched strikes against Iranian military positions near Bandar Abbas. The IRGC subsequently retaliated with ballistic missiles against a US base in Kuwait, which were successfully intercepted by the Kuwaiti military. On Monday, the US military also struck two vessels laying mines in the strait and an air defense position in Bandar Abbas. Croft believes that February 27, 2026, may prove to be the peak for tanker traffic through the Strait of Hormuz for the foreseeable future. Any truce outcome that leaves actual control of the Strait of Hormuz in Iranian hands will result in transit volumes significantly below historical normal levels. ## Accelerating Inventory Depletion, October May Touch Historically Dangerous Lows While the deal narrative dominates price movements, RBC's data reveals a fundamental reality that is worsening at an accelerating pace. As the crisis enters its third month, the continuous depletion of global inventories due to Middle East supply disruptions is becoming increasingly prominent. Croft calculates that if depletion continues at the current six-week average rate, the number of days of inventory coverage, measured by onshore crude stocks against refinery throughput, could fall to the 30–40 day range before October—this would be the lowest level since RBC established its dataset in 2016. Falling below this threshold could jeopardize normal industry operations due to logistical bottlenecks and insufficient raw material supplies. Notably, the initial impact of the crisis was relatively controllable due to ample initial inventory levels and the coordinated release of Strategic Petroleum Reserves (SPR) by various countries, which buffered the immediate impact of this largest-ever supply shock to some extent. However, Croft points out that these "energy shock absorbers" are rapidly being exhausted. RBC also expects that the rate of inventory depletion will accelerate further in the coming weeks, potentially bringing the crisis point earlier than expected. Furthermore, due to limited visibility of market data in other countries, the current decline in inventories may be systematically underestimated, meaning the actual situation could be tighter than what known data suggests. Based on these judgments, Croft concluded that without any substantive breakthrough, **RBC is confident that June to August will constitute a severe stress test for the crude oil market—"and this market has so far been avoiding pricing for the worst-case scenario by persuading itself."** She wrote: > "Time is running out, and the window to reopen the Strait of Hormuz and avoid a hard landing is narrowing rapidly." ## Deal Difficult to Implement: Triple Obstacles of Logistics, Insurance, and Sanctions Even if the US and Iran ultimately sign a memorandum extending the ceasefire, **RBC believes that the Strait of Hormuz is unlikely to see a substantive and rapid recovery.** From an operational perspective, even if more vessels are permitted to pass, initial traffic will likely be predominantly one-way, increasing the logistical complexity of clearing the shipping lane. Given the continued threats posed by missiles, drones, and mines, Croft finds it difficult to foresee how many Western shipping companies would be willing to risk returning to this route based solely on a 60-day MOU. Exorbitantly high insurance premiums, along with legal obstacles involved in paying or coordinating passage with IRGC-related entities under the US sanctions framework, further compress the actual choices available to shipowners. Experts within the shipping industry have pointed out that an Iran-led reopening plan likely means limited transit volumes, and the complete restoration of the strait may require the explicit defeat of Iranian military forces and the achievement of unrestricted passage as prerequisites. Meanwhile, the accelerated promotion of alternative land transport routes in the UAE and Saudi Arabia's continued high-load utilization of the East-West Pipeline have become realistic choices for the Gulf region in adapting to the new landscape. Croft also raised a strategically significant question: Are there forces within Iran inclined to maintain the current status quo of "no war, no peace, and minimal oil flow"? These forces may judge that as summer approaches and the economic cost of inventory depletion becomes increasingly difficult to conceal through public opinion management, Iran's negotiating leverage will naturally strengthen. Although the dual blockade has clearly drained the Iranian government's finances and oil and gas operational efficiency, reports indicate that Iran is still selling previously sanctioned oil through exemption clauses and generating revenue from Strait of Hormuz transit fees. More notably, although the current level of hyperinflation is far more severe than in January of this year, the Iranian government has reportedly not faced a new wave of large-scale protests so far, and it is claimed that the IRGC has used the ceasefire period to rebuild part of its military capabilities—this may imply that hardliners in Tehran believe time is on their side. ### Related Stocks - [OXY.US](https://longbridge.com/en/quote/OXY.US.md) - [VDE.US](https://longbridge.com/en/quote/VDE.US.md) - [IXC.US](https://longbridge.com/en/quote/IXC.US.md) - [CRAK.US](https://longbridge.com/en/quote/CRAK.US.md) - [USO.US](https://longbridge.com/en/quote/USO.US.md) - [XES.US](https://longbridge.com/en/quote/XES.US.md) - [XOP.US](https://longbridge.com/en/quote/XOP.US.md) - [OIH.US](https://longbridge.com/en/quote/OIH.US.md) - [XLE.US](https://longbridge.com/en/quote/XLE.US.md) - [IEZ.US](https://longbridge.com/en/quote/IEZ.US.md) - [BNO.US](https://longbridge.com/en/quote/BNO.US.md) - [IEO.US](https://longbridge.com/en/quote/IEO.US.md) - [UCO.US](https://longbridge.com/en/quote/UCO.US.md) - [RY.US](https://longbridge.com/en/quote/RY.US.md) ## Related News & Research - [The new oil order that could emerge from an Iran deal](https://longbridge.com/en/news/287611416.md) - [Why oil prices are falling today](https://longbridge.com/en/news/287811934.md) - [ROI-ENERGY WATCH: Oil up again on fresh strikes in Iran](https://longbridge.com/en/news/287947088.md) - [Sugar Prices Retreat as Crude Oil Slumps](https://longbridge.com/en/news/287668961.md) - [Gas prices fall for second day after holiday spike](https://longbridge.com/en/news/287859510.md)