Yesterday (25), the most active Brent contract closed sharply lower at USD 96.30/bbl (–6.97%), after touching daily lows around USD 95/bbl. WTI followed the movement, ending at USD 90.88/bbl (–6.5%), with reduced volumes due to the Memorial Day holiday in the U.S.
The main driver of the session was the perception that the U.S. and Iran were nearing a memorandum of understanding capable of ending the war and reopening the Strait of Hormuz, reducing the risk premium embedded in the curve and leading funds to quickly liquidate long positions.
This morning (26), Brent is trading at USD 98.3/bbl (+2.3%), recovering part of the losses recorded yesterday. Confirmation by Marco Rubio about the possibility of negotiations “taking days” to occur and the American attacks on Iranian territory contribute to the reincorporation of risk premiums into prices at the start of the session.
U.S. attacks Iranian missile launchers
While Iranian negotiators were in Doha discussing a ceasefire, CENTCOM conducted new attacks on vessels and missile launch facilities in southern Iran, justified as "defensive measures." Secretary of State Marco Rubio stated that the agreement "may take a few days," dampening expectations for an immediate resolution.
Why this matters: Yesterday's movement already priced in a high likelihood of reopening the strait, eliminating part of the risk premium built over the last three months. With the attacks and the harsh rhetoric from Iran's Supreme Leader, the market reassumes uncertainty about the timing of the agreement, reinstating a short-term bullish bias. The key variable now becomes the interval between a potential MOU and the physical reopening of the strait.
Overview: The Strait of Hormuz remains blocked for general navigation: of the 125 to 140 ships that passed daily before the war, only a few dozen transit today — mostly linked to countries with bilateral agreements with Tehran, utilizing the toll system.
- Three LNG ships crossed the strait in recent days, heading to Pakistan, China, and India, along with a VLCC carrying Iraqi oil to China that had been stranded for nearly three months.
- The MOU under discussion provides for a 30-day period to remove mines and normalize traffic, with an additional 60 days to negotiate nuclear issues — a structure suggesting that any significant supply relief is at least two months away.
- This would be the sixth attempt at an agreement since the conflict began on February 28; the previous five collapsed over implementation details.
What to expect: If the MOU is formalized in the coming days, Brent is likely to continue declining, with the market anticipating gradual reopening — but without eliminating the premium until physical flows are confirmed.
- Conversely, if American attacks or announced Iranian retaliation lead to a breakdown in negotiations, repricing movements could push Brent back above USD 100 bbl.
India reduces processing in April
Indian refinery processing in April fell by 8.9% compared to March, to 5.23 mbpd in April. The main explanation is the disruption in Middle Eastern flows, which forced refineries to seek alternatives in Latin America and Africa, with higher logistical costs and longer lead times.
Why this matters: India is the third-largest importer and consumer of oil in the world. A contraction in processing indicates that the Hormuz shock is already affecting effective demand for crude oil — not just prices. It's worth noting that about 80% of the oil produced in the Persian Gulf was destined for Asia, with the conflict more severely impacting this continent, especially major consumers like China and India.
Overview: The Nayara Energy refinery (Vadinar), partially controlled by Rosneft, reduced processing by 70% in April, with the decline justified by maintenance and difficulties in replacing Russian oil.
- Reliance Jamnagar, the world's largest private refinery, reported a 14% reduction, indicating difficulty in replenishing supply even for refiners with greater flexibility in sourcing.
- Indian refiners have shifted to importing primarily from Latin America and Africa, routes with delivery times 15–25 days longer than those from the Persian Gulf — compressing operational efficiency and raising the effective cost per barrel.
- With Hormuz partially blocked, India loses preferential access to low-cost products from the Gulf, forcing adjustments in refining configurations to accommodate heavier or higher sulfur-content oils.
What to expect: If the MOU is concluded and the strait gradually reopens, suppressed Indian demand is likely to translate into significant refining recovery in the second half — a scenario that reinforces support for the Brent curve even with more barrels returning to the market. If the blockade extends for another two or three months, further declines in processing are likely, putting additional pressure on global refining margins.
