Global oil prices have tumbled mightily over the past month, retracing nearly all of the gains recorded since the U.S. war with Iran that began in late February, as investors adjust to a near-term supply surge and an expected pullback in demand over the back half of the year.
Brent crude futures for September delivery, the global pricing benchmark, were last trading 4% lower at $73.76 a barrel. That's just over 1.2% higher than the futures closing price on Feb. 27, the day before the U.S. launched its first airstrikes on Iranian targets. Brent is down more than 25% over the past month.
U.S.-focused WTI crude futures, meanwhile, briefly traded south of the $70 mark on Wednesday for the first time since the strikes, and have fallen more than 27% since early June.
Stocks, however, appear to have stopped reacting to both the decline in global crude and the prospect, however flawed, of a lasting peace agreement in the Gulf that will normalize supply flows and stabilize energy markets.
The S&P 500 has fallen more than 1.4% over the past month, and is on pace to finish June firmly in the red, despite having notched a fresh all-time high on June 2. The index is down even with the sharp decline in oil and a massive 13% slide in domestic gas prices. The Nasdaq Composite is down around 3%.
The far-more narrowly focused, and price-weighted Dow Jones Industrial Average, however, has gained around 3.3%, suggesting at least some rotation of cash from tech-dominated indexes to those that reflect the broader economy.
Questions over the fate of the artificial intelligence investment wave, the rapid advance in chip stocks, and the impact of a suddenly hawkish Federal Reserve under new Chairman Kevin Warsh have all pulled stocks sharply away from the correlation to global oil prices and will likely separate their performance over the back half of the year.
"Negotiations were always going to be fractious, and no doubt there will be more volatility before things are brought to a close," said Thomas Matthews, head of markets for the Asia Pacific region at Capital Economics. "But as long as re-escalation is ultimately avoided, our sense is that domestic macro drivers -- rather than oil's daily fluctuations -- will reassert themselves as the key influence on markets."
Oil's decline is certainly staggering, given that markets have had to deal with the biggest supply disruption in history, which removed 1.3 million barrels a day of production from the Gulf region and effectively closed the Strait of Hormuz for much of the second quarter.
Government action, however, has likely kept prices from spiraling out of control. International Energy Agency data suggests massive drawdowns in inventories from markets around the world, including the U.S., where the Strategic Petroleum Reserve fell to its lowest level since 1983 last week.
The focus now, according to Ole Hansen, head of commodity strategy at Saxo Bank, is shifting toward a near-term supply glut.
"With shipping traffic steadily improving through the Strait, traders are increasingly focused on a growing queue of cargoes waiting to move," he said.
"Millions of barrels are already loaded on tankers that were unable to leave the Gulf during the disruption, while hundreds of additional vessels remain positioned outside the region waiting to load," he added. "Markets are effectively pricing the reopening of the supply pipeline rather than the underlying depletion of inventories."
Oil's decline should remove some of the inflation-powered rise in U.S. Treasury bond yields, which saw 10-year notes rise as high as 4.57% earlier this month, and 30-year paper topped the 5% mark.
Yields on benchmark 10-year notes were last seen at 4.41%, about a quarter-point south of the late May peak, with rate-sensitive 2-year note yields retreating to 4.14%.
That will help stocks into the summer months, especially during the early July gap between the end of the second quarter and the unofficial start to the earnings season with JPMorgan's update on July 14.
But the broader sense from markets is that stocks and oil are likely to continue their recent separation, at least until the supply picture develops more clearly, alongside developments in U.S.-Iran peace talks.
"The key uncertainty remains how quickly oil flows through the Strait of Hormuz can normalize, which obviously, this depends on how quickly upstream oil production in the Persian Gulf can return," said Warren Patterson, head of commodities strategy at ING.
"While the consensus is that this normalization will take months rather than weeks, price action in the oil market suggests a more rapid recovery," he added.
That at least removes one barrier for stock performance over the second half of the year. But the early market signs suggest that might not be enough to power a solid summertime rally.
Write to Martin Baccardax at martin.baccardax@barrons.com
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(END) Dow Jones Newswires
June 24, 2026 13:07 ET (17:07 GMT)
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