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Crude oil futures retreated in early Sunday trading, extending losses from the previous week as military tensions between Washington and Tehran appeared to ease. September-delivery Brent crude fell 4.9% to $92.02 per barrel, continuing Friday’s 3.9% decline and moving further away from last week’s two-month peak of $102.
The moderation in prices reflects a temporary pause in hostilities between the two nations in the Persian Gulf region. Last week’s spike had driven Brent crude to its highest level since May, driven by concerns that escalating conflict could disrupt global energy supplies and choke off shipping through strategic waterways.
The Strait of Hormuz remains a focal point for market anxiety, with roughly a fifth of the world’s crude oil transiting the narrow passage off Iran’s coast. Attacks on Saudi tankers in the Red Sea last week highlighted the vulnerability of alternative shipping routes as producers attempt to circumvent the main chokepoint, a situation that has largely halted normal traffic flows.
U.S. benchmark crude for September delivery dropped 5.6% to $84.34 on Sunday, following a 3.1% decline the previous day. October contracts, the most actively traded instrument, lost 4.6% to settle at $87.48, signaling sustained market caution despite the recent de-escalation.
The volatile oil market has already begun reshaping consumer costs. Regular gasoline averaged $4.11 per gallon nationally on Sunday, up from $3.90 a month earlier and $3.15 a year ago, according to AAA data. Extended elevated crude prices could ripple through supply chains and inflation measures, potentially affecting grocery prices and shipping-dependent goods.
Market participants are pricing in a 36% probability that the Federal Reserve will raise interest rates at its next meeting, according to CME Group data, as sticky inflation concerns persist despite oil’s recent pullback. Higher borrowing costs could dampen economic growth by making financing more expensive for households and businesses, while potentially chilling the housing sector and artificial intelligence infrastructure investments that have recently fueled economic expansion.
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