Crude oil markets suffered the largest single-day decline in years on Tuesday, May 5, 2026, with WTI crude futures crashing as much as 13.2% intraday to a low of $88.71 per barrel — the first sub-$90 print since April 21. Brent crude plummeted as much as 12% to an intraday low of $96.77. The crash followed reports that the United States and Iran were close to a one-page, 14-point memorandum of understanding that would end the war, reopen the Strait of Hormuz, and establish a framework for further negotiations.
The selloff began before the U.S. cash open and accelerated through the morning as confirmation arrived that Defense Sec. Pete Hegseth had described the ceasefire as “currently effective” and Sec. of State Marco Rubio had said the “offensive phase” of military operations against Iran had “ended.” President Trump on Tuesday night announced he was pausing Project Freedom shipping operations to allow space for the deal to be reached and signed, citing “significant progress” with Iranian representatives.
Iranian Foreign Minister Abbas Araghchi departed Tuesday for Beijing as China continues to mediate U.S.-Iran negotiations in parallel with the Pakistan back channel. The combination of three concurrent diplomatic tracks — bilateral memorandum drafting, Pakistani mediation, and Chinese facilitation — appears to have given markets enough confidence to unwind the “panic premium” that had built into crude during the previous week’s Hormuz exchange of fire.
The intraday recovery was partial. Both benchmarks closed Tuesday well off their lows, with WTI settling around $93 and Brent around $103. Traders described the move as a “panic premium unwind” rather than a fundamental reset. The structural supply deficit driving the rally remains in place: the IEA estimates the war is removing roughly 14 million barrels per day from global supply, GCC production capacity has sustained damage, and U.S. gasoline inventories have fallen for 12 consecutive weeks.
Wall Street responded by adjusting forecasts. Goldman Sachs raised its Q4 2026 Brent forecast to $90 per barrel and WTI to $83. Barclays now sees Brent holding near $100 even after a peace deal. Both desks emphasized that any post-conflict production recovery would be slow: insurers remain reluctant to service tankers crossing the strait, and resumption of GCC capacity is expected to take months rather than weeks. Goldman noted total global oil stocks at roughly 101 days of demand currently, falling to 98 days by end of May.
Refined products tracked crude lower but with less violence. Gasoline RBOB fell to roughly $3.30 per gallon by week’s end. ULSD diesel and jet fuel both pulled back from May 4 highs. Despite the sharp move down, the AAA national gasoline retail average actually continued climbing through the week to reach $4.546 by Friday May 8 — up 25 cents on the week and at the highest level since 2022. The retail-to-spot lag means consumers will not see Tuesday’s crash at the pump for another 1–2 weeks.
Prediction markets remained bullish on continued strength. Kalshi traders currently assign greater than 50% probability that WTI will reach $127 per barrel at some point this year, well above the current trading range. The market consensus is now that crude trades in a $95–$105 range on WTI through the summer, with directional moves determined almost entirely by diplomatic headlines out of Washington, Tehran, Islamabad, and Beijing. For continuing coverage, see our live oil prices dashboard.