New York: Crude oil prices fell in morning trading on Sunday after the United States and Iran halted military attacks for a second straight day; the decline comes from a two-month high.
The conflict between the United States and Iran resumed earlier this month after peace talks between the two countries failed and the ceasefire broke down.
Following this, the United States had been carrying out intense bombing attacks on Iran for about two weeks. The United States has now stopped those attacks. However, the country has not explained why the attacks were halted. Nevertheless, the U.S. Navy has stated that the blockade on Iranian ports remains fully in place.
At the same time, in retaliation for the U.S. attacks, Iran, which attacks U.S. military bases in Gulf countries and other targets, has not been reported to have carried out such attacks.
In this situation, crude oil prices fell in Sunday morning trading after the United States and Iran halted military attacks for a second consecutive day; this decline comes after prices had reached a two-month high last week.
The price of Brent crude for September delivery fell 4.9% to $92.02 shortly after trading began. This drop followed a 3.9% decline on Friday.
The price of Brent crude oil, considered the international benchmark, rose to $102 per barrel last week. Although that was $30 higher than the price of the most actively traded Brent contract at the beginning of the month, it crossed the century mark for the first time since May, shocking countries around the world.
During the initial attack on Iran by the United States and Israel, crude oil traded above $100 per barrel on May 12. A similar situation occurred during the Russia-Ukraine war in 2022.
Crude oil prices rose this month amid concerns that escalating conflicts in the Middle East and a renewed full-scale war could further slow the global supply of crude oil.
Since the United States and Israel attacked Iran at the end of February, the safe passage of oil tankers through the Strait of Hormuz has been a major concern for the oil market. Through this narrow strait off Iran’s coast, one-fifth of the world’s oil leaves the Gulf and reaches customers around the world; the current conflict situation has severely disrupted shipping.
Since then, oil producers have been seeking alternative routes, but those routes too have come under strain. Last week, Saudi oil tankers using the Red Sea to leave the region were attacked. When less oil is available for customers to buy, its price and fuel prices rise.
According to data from the motorists' association, the average price of a gallon of regular gasoline in the United States on Sunday was $4.11; it was $3.90 a month ago and $3.15 a year ago.
If oil prices remain high, the cost of everything transported around the world by ship, truck, or plane, including groceries, could also rise. Although the U.S. economy has continued to grow, the current conflict with Iran has weakened consumer confidence.
Since inflation began to ease more than economists expected, oil prices have risen again this month. According to data from CME Group, traders believe inflationary pressure has increased; as a result, they say there is a 36% chance that the Federal Reserve will raise its key interest rate at the upcoming meeting.
Higher interest rates can help control inflation; however, at the same time, they can also slow economic growth by making borrowing more expensive for Americans and businesses.
For example, long-term mortgage interest rates in the United States have reached a one-year high, which has caused a slowdown in the housing sector. In addition, the rising cost of borrowing could also reduce the construction boom in artificial intelligence data centers, which have become a major driver of U.S. economic growth.
Although oil prices have eased somewhat from the sharp rise seen in July, there is still considerable uncertainty.
The price of a barrel of the U.S. benchmark oil grade to be delivered in September fell 5.6% on Sunday to $84.34. On Friday, it had fallen by 3.1%.
In the oil market, traders buy and sell contracts for barrels of oil to be delivered several months in the future. The price of a barrel of Brent crude for October delivery, which is currently the most actively traded in the market, has fallen 4.6% to $87.48.
