Crude oil prices surged Monday, May 25, 2026, after the U.S. military destroyed two Islamic Revolutionary Guard Corps vessels caught laying naval mines in the Strait of Hormuz and struck a surface-to-air missile battery at Bandar Abbas that had targeted American warplanes, raising fresh fears that a U.S.-Iran agreement to end the three-month war could slip away just as it appeared within reach. Senior U.S. defense officials briefing reporters Monday afternoon confirmed the strikes, which arrived mid-session and forced traders to abandon what had been one of the steepest single-day collapses in crude prices since the war began.

The reversal was violent. International benchmark Brent crude had earlier plunged roughly 7% to trade near $96 a barrel and West Texas Intermediate had skidded to roughly $90 a barrel after President Donald Trump posted on Truth Social that negotiations with Tehran were “proceeding nicely” and disclosed he had pressed Saudi Arabia, Qatar, Pakistan, Turkey, Egypt and Jordan to join the Abraham Accords as part of a wider regional settlement. The Monday slide had extended last week’s drop of more than 5% in Brent and over 8% in WTI, unwinding much of the war premium that had carried Brent above $114 just three weeks ago. The afternoon strikes erased a meaningful portion of the day’s losses and reignited the volatility that has defined the conflict.

The mine-laying operation was caught in real time. According to reporting from Fox News national security correspondent Jennifer Griffin citing a senior U.S. official, American forces tracked the two IRGC craft as they were depositing mines into the shipping lane and engaged them before the devices could be fully positioned. Both vessels were destroyed. U.S. Central Command considers them eliminated. The episode is the precise scenario American commanders have warned about for months: Tehran deploying small, fast-moving craft from its “mosquito fleet” to seed the world’s most critical oil chokepoint with naval mines, a tactic that could close the strait to commercial shipping for weeks even after a ceasefire is signed.

The second engagement followed almost immediately. A SAM site at Bandar Abbas — the southern Iranian port city that serves as the IRGC Navy’s primary operational hub and the inspection point through which Iran routes vessels transiting the strait — locked onto U.S. warplanes operating in the area. American forces struck the battery in response. Iran’s Mehr News Agency acknowledged sounds of explosions east of Bandar Abbas but said the situation in the city itself was normal. Separately, OSINT monitors and regional wire feeds reported large fires on Kharg Island, the terminal that handles roughly 90% of Iran’s crude exports, though U.S. officials have not confirmed American responsibility for that incident.

Pentagon officials, through Griffin’s reporting, were emphatic about the framing: the strikes were defensive in nature, not offensive, and not an attempt to break the ceasefire. U.S. officials said the operation is finished for now. That language is deliberate and aimed squarely at oil traders and at the Iranian negotiating team. The White House is signaling that mine-laying in the strait crosses a hard red line — even during active peace talks — but that American forces will not expand the engagement beyond the immediate threat. Whether Tehran accepts that distinction will determine the next 48 hours in the energy market.

The diplomatic track had been gathering real momentum before the strikes. U.S. Secretary of State Marco Rubio said last week there were “good signs” an agreement to end the war was within reach, while warning any deal would be “unfeasible” if Iran insists on permanent control over Hormuz shipping. A Pakistani mediator separately briefed Beijing that an accord was nearing. The framework under discussion would extend the existing ceasefire for roughly two months, during which Washington would lift its naval blockade of Iranian ports — in place since April 13 — and Tehran would reopen the strait to international shipping. Through that chokepoint normally moves about one-fifth of the world’s seaborne oil and 20% of global liquefied natural gas, flows that have been effectively halted since the war began February 28.

Two fault lines remain unresolved and both were on display Monday. Iran’s enriched uranium stockpile continues to be the central nuclear sticking point — Trump posted that the material will either be turned over to the United States and destroyed or handled in coordination with Tehran. The second is Iran’s demand to retain authority over maritime traffic through Hormuz and to collect tolls reported to exceed $1 million per ship. The mine-laying activity that triggered Monday’s American strikes underscores how far the two sides remain from operational normalization of the waterway, regardless of progress at the negotiating table.

Energy executives are bracing for a prolonged tail. A recent note from MUFG told clients that full normalization of Middle East oil supply may not occur until 2027 given infrastructure damage and dislocated shipping insurance markets. Chevron Chief Executive Mike Wirth told CNBC’s David Faber at the Milken Institute Global Conference earlier this month that fuel shortages are now a growing concern in parts of the world dependent on Gulf product flows, particularly naphtha, LPG and jet fuel. A Goldman Sachs note to clients flagged accelerating drawdowns in easily accessible refined-product buffers, while OPEC+ is weighing an output increase that analysts at Wood Mackenzie warn cannot offset Hormuz disruption in the near term.

The market is left holding two contradictory data points from the same Monday session: a president signaling diplomatic breakthrough and a U.S. military operation that destroyed Iranian warships in the strait. Traders are pricing both, and the next move belongs to Tehran.

JBizNews Desk

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