Oil prices fell sharply Monday as a pause in fighting between the U.S. and Iran eased fears of a wider conflict. U.S. Ambassador to the United Nations Mike Waltz said Sunday on “Face the Nation with Margaret Brennan” that the lull is intended to give diplomacy “some space.”
Brent crude, the global oil benchmark, dropped $6.35, or 6.6%, to $90.41 a barrel. West Texas Intermediate, the U.S. benchmark, declined 5.7% to $84.23.
U.S. stocks were uneven in morning trading. The S&P 500 slipped 14 points, or 0.2%, to 7,399, while the Dow Jones Industrial Average rose 170 points, or 0.3%. The tech-focused Nasdaq Composite fell 0.5%.
The retreat in crude prices followed a volatile stretch in which oil briefly climbed above $100 a barrel, pushing gasoline prices past $4 a gallon and stoking fresh worries about inflation. The shift back toward diplomacy helped calm global investors, with major markets in Europe and Asia also moving higher Monday.
“Oil’s sharp retreat at the Monday open did more than knock a few dollars off the barrel. It loosened the geopolitical knot that had been tightening around equities, currencies, bonds and central banks for most of July,” Stephen Innes of SPI Asset Management said in a commentary.
Speaking on “Face the Nation,” Waltz said the pause in Middle East hostilities is giving diplomatic efforts “a little bit of time” to gain traction. Still, he cautioned that additional U.S. military assets are continuing to move “into the region.”
Iran’s government said Monday it is not participating in direct negotiations with the United States. However, after three nights of relative calm, Tehran acknowledged discussions with Oman focused on creating “mechanisms regarding maritime traffic” in the Strait of Hormuz.
The recent jump in energy costs, combined with fresh tariffs announced last week by the Trump administration, could add renewed pressure to inflation. That, in turn, may further complicate the Federal Reserve’s interest rate policy outlook.
While the Fed is expected to leave interest rates unchanged at its latest meeting on Wednesday, rising oil prices have prompted investors to sharply increase their bets that a fresh rate hike could come later this year.
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Alain Sherter
contributed to this report.
