The Numbers
Brent crude is trading around $91 per barrel on Friday, down roughly 2% on the day and around 17% for the month. WTI is near $87, its lowest level in six weeks. Both benchmarks are on track for their worst monthly performance since the pandemic-driven collapse of 2020.
Five days ago, VonTrend published "An Iran Deal Would Kill the Energy Rally." That thesis is playing out faster than even the pessimistic case suggested. Brent peaked above $110 earlier this month. It has given back nearly 20% of its 2026 gains in a matter of weeks.
The Energy Select Sector SPDR (XLE) is down around 1.2% today, extending a slide from its May highs. ExxonMobil is trading around $145 at roughly 13.6 times forward earnings, down from $176 in early May. ConocoPhillips is near $113.50 with a 2.3% dividend yield. Occidental Petroleum is around $56.30, trading at roughly 13 times forward earnings after falling 16% from its May high.
The Catalyst Happening Right Now
President Trump posted on Truth Social Friday morning that he is meeting in the White House Situation Room to make a "final determination" on a proposed 60-day memorandum of understanding with Iran.
His stated conditions: Iran must agree to never develop a nuclear weapon. The Strait of Hormuz must open immediately with no tolls and unrestricted shipping in both directions. All water mines must be removed. Enriched uranium buried at previously attacked nuclear sites must be unearthed and destroyed in coordination with the IAEA. No money exchanged until further notice.
The deal framework, negotiated over recent weeks, would extend the existing ceasefire and begin formal talks on Iran's nuclear program. Iranian negotiators reportedly secured an agreement to release roughly $12 billion in frozen assets as part of the package.
The market is pricing in a high probability of deal completion. Oil has sold off steadily this week on each incremental step toward agreement. If Trump signs today, expect another leg down in crude and energy stocks heading into the weekend. If he walks away, oil gaps higher Monday and every energy name bounces.
What a 17% Monthly Drop Changes
For energy stocks: The war premium that powered a 37% energy sector rally from February through early May is evaporating. Companies that traded on supply disruption risk now trade on fundamentals. Devon Energy, which closed its merger with Coterra Energy three weeks ago, is trading at roughly 8.5 times forward earnings with a variable dividend model. That valuation looks different when oil is at $87 than when it was at $110. The question for every energy holding is whether the company generates acceptable free cash flow at current prices, not peak prices.
For inflation: April's headline PCE printed at 3.8% year over year, the highest since 2023. But energy costs drove much of that spike. If oil stabilizes in the high $80s or drops into the $70s on a signed deal, the June and July inflation readings start to moderate. That gives Fed Chair Kevin Warsh more room at the June 16-17 FOMC meeting. Not enough to cut rates. But possibly enough to delay the rate hike that several analysts, including Ed Yardeni, now expect by July.
For the broader market: The S&P 500 just rallied through hot inflation data, a missile strike, and oil above $100, and still hit new all-time highs. Lower oil removes one of the three headwinds that skeptics pointed to. The AI infrastructure trade, which VonTrend covers extensively, benefits directly from lower energy costs as data center power expenses decline.
What to Watch From Here
Trump's decision is the immediate catalyst. Beyond that, the next data points are OPEC's June meeting and the June 10 CPI release. If Hormuz reopens and Iranian oil re-enters global markets, the supply side shifts materially. OPEC would face the question of whether to cut further to support prices or accept lower revenue.
For energy portfolios, the positioning question depends on the deal outcome. Companies with the lowest breakeven costs and strongest balance sheets survive oil at $80 or lower. Those leveraged to high prices through aggressive capex or weak cash flow face a harder path if the war premium keeps unwinding.
