Brent crude oil prices fell sharply Sunday, recording their steepest single-day decline in two months after a second consecutive day passed without military strikes in the Persian Gulf.
The international benchmark Brent crude dropped 4.9% to $92.02 per barrel shortly after trading resumed Sunday, following a 3.9% decline on Friday.
Brent crude had briefly surged to $102 per barrel last week, its highest level since May and roughly $30 above where the most actively traded contract stood at the start of the month.
Oil prices climbed sharply this month as intensifying Middle East fighting stoked fears that a return to full-scale war could severely disrupt global crude supply flows.
The central concern for oil markets has been the safety of tanker passage through the Strait of Hormuz, a narrow waterway off Iran’s coast through which a fifth of the world’s oil typically flows.
Conflict in the region largely halted shipping traffic through the strait after the United States and Israel attacked Iran in late February, creating significant supply anxiety among traders worldwide.
The United States held fire over the weekend after 13 consecutive nights of strikes on Iran, with Washington’s UN envoy stating the US was “giving talks some space.”
Tehran, in turn, announced it would halt retaliatory attacks on regional neighbors, offering Gulf shipping lanes and the broader oil industry a meaningful period of relief.
The pause broke a streak that represented the largest escalation of the nearly five-month-old conflict since an April ceasefire had temporarily quieted hostilities.
American drivers have felt the impact directly, with the average price of a gallon of regular gasoline reaching $4.11 on Sunday, up from $3.90 a month ago and significantly higher than the $3.15 recorded a year ago, according to motor club AAA.
Sustained elevated oil prices carry broad economic consequences, potentially raising costs for every product shipped, trucked, or flown around the world, including basic groceries for consumers.
Consumer confidence has declined under pressure from the ongoing conflict with Iran, even as the broader US economy has continued to grow through the turbulence.
The reacceleration of oil prices this month arrived at a particularly difficult moment, just as inflation had begun slowing more sharply than most economists anticipated.
Markets are now pricing in rising rate pressure, with traders betting on a 36% chance the Federal Reserve will hike its main interest rate at an upcoming meeting, according to data from CME Group.
Significant uncertainty remains in oil markets despite the recent price pullback, as the durability of the current pause in hostilities has yet to be tested.
