The oil market moved as if the war was over last week. Brent crude fell from above $116 in early May to $93.26 on May 31, a decline of more than 20%, driven primarily by reports that U.S. and Iranian negotiators had reached a 60-day memorandum of understanding. The MOU would extend the ceasefire, reopen the Strait of Hormuz to unrestricted shipping, and launch framework talks on Iran's nuclear program. As of June 1, the deal has not been signed by President Trump. Iran has not confirmed the text is finalized. And even when it is signed, it will not reopen the strait in the week that follows.
The gap between the market's pricing of the deal and the physical reality of what reopening requires is the analytical story for Canadian portfolios this week. TSX energy names have fallen with crude. The mine-clearing timeline has not changed.
What the MOU Actually Says and What It Does Not
The terms of the MOU, as reported by Axios and confirmed by U.S. officials to CNBC and Al Jazeera, include unrestricted passage through the Strait with no tolls or harassment of vessels, Iran clearing mines it deployed within 30 days of the deal's signing, a proportional lifting of the U.S. naval blockade as commercial shipping resumes, and sanctions waivers permitting Iran to sell oil freely during the 60-day period. In exchange, Iran has given verbal commitments on nuclear concessions that will be formalized in subsequent negotiations, though U.S. officials acknowledged, as one told Axios, "We will not know until we get in the room, which is why we want to do this MOU."
The sticking points remain real. Trump's three stated conditions for Iran are: reopening Hormuz, surrendering highly enriched uranium stockpiles, and ending the nuclear program. Iran's red lines, per Ebrahim Azizi of the Iranian parliament's national security committee, include the right to enrich uranium and maintain stockpiles, and control of the Strait of Hormuz itself. Vice President Vance told reporters on May 29 that "I can't guarantee that we're going to get there, but right now I feel pretty good about it." Trump said Wednesday the sides hadn't yet reached a deal and warned that he would "just finish the job" if they did not. The deal's status on the morning of June 1 is: tentatively agreed at the negotiator level, unsigned by the principals, contested by Iranian state media, and dependent on Trump's approval of terms he has repeatedly said do not yet fully satisfy him.
The Mine-Clearing Arithmetic
Assume the MOU is signed this week. The 30-day mine-clearing clock begins. Pentagon officials told the House Armed Services Committee in a classified briefing on April 22 that full clearance of the mines Iran deployed in the strait would likely take up to six months. Defense Secretary Pete Hegseth declined to confirm the six-month estimate publicly but did not deny it. The MOU's 30-day provision for mine clearance is either an aggressive operational target that assumes near-ideal conditions, or it is a political commitment whose enforceability remains unclear.
Even with mines cleared, the physical supply chain does not restore immediately. Eurasia Group managing director Henning Gloystein estimated in April that tanker operators alone would take at least two months to resume operations from their current anchorage positions after hostilities are suspended. The voyage from Singapore to the Gulf takes approximately four weeks, meaning vessels could begin delivering Middle Eastern crude to Asia roughly eight weeks after departing current anchorage. Kuwait Petroleum Corporation told Qatar News Agency in March that it expects three to four months to restore full production capacity after the war ends. The EIA's May 12 Short-Term Energy Outlook, which assumed Hormuz begins reopening in late May, still forecast Brent averaging $89 in Q4 2026 and $79 in 2027.
The chart below shows the EIA's Brent price path through 2026 against the current spot price, with the key physical milestones annotated. The market has priced in the MOU. The supply restoration timeline runs considerably longer.
The EIA's May STEO forecast (dashed) assumed Hormuz begins reopening in late May and forecast Brent averaging $106 in Q2, declining to $89 in Q4 and $79 in 2027. The current spot of $93.26 sits below the EIA's Q2 forecast, suggesting markets have priced a faster resolution than even the optimistic EIA scenario. The supply chain milestones annotated on the forecast path illustrate why the price normalization still runs through Q3 at minimum even if the MOU is signed this week.
What This Means for Canadian Energy Exposure
Canadian oil sands producers do not export through the Strait of Hormuz. The conflict's relevance to TSX energy names was always indirect: elevated global crude benchmarks lifted WCS prices, even accounting for the persistent $20-$30 per barrel discount to WTI, and extraordinary cash flows followed. Suncor gained more than 90% over the trailing 12 months as of mid-May. Canadian Natural Resources, Cenovus, and the broader TSX energy sub-index reflected similar magnitude moves.
The ceasefire re-rating has partly reversed those gains. Suncor dropped 2.12% to C$91.05 on the day TSX energy lagged the broader index by 2.1%, per Reuters reporting from late May. The question for Canadian portfolio positioning is whether the re-rating is complete or whether a second leg down awaits if the MOU is formally signed and Brent continues toward the EIA's $89 Q4 target.
The argument against a second leg down is the supply restoration timeline itself. If mine-clearing takes up to six months and tanker repositioning takes two more, the physical supply gap does not close until well into Q4 or beyond. The EIA forecast Brent at $89 in Q4, not in June. The market's move to $93 in late May may have front-run the deal but has not fully priced the normalization. At $93 WTI-equivalent, Canadian integrated producers with break-even costs well below $40 per barrel are still generating exceptional cash flow. The war premium has deflated. The cash flow premium has not.