CNBC- Oil prices fell Tuesday after a pause in fighting between the U.S. and Iran held.
- The international benchmark for September delivery fell more than 2% to $86.52 a barrel.
- For September delivery, oil prices dropped 2.3% to $80.71 a barrel.
- The Commonwealth Bank of Australia said on Tuesday that recent decline in oil prices reflects easing concerns over an immediate escalation between the U.S. and Iran.
- Oil prices continued to trend lower in early Asian trade on Tuesday as a fourth night passed without any attacks from either Iran or the United States.
- At the time of writing, oil was trading at $80.98 per barrel, down 1.97% on the session, while Brent had slipped to $86.80 per barrel, a decline of 1.77%.
- Despite the pullback, oil prices remain elevated as shipping disruptions continue to weigh on Middle East energy flows, with particular concerns over Red Sea traffic as the Houthis attempt to control the Strait of Hormuz.
- Traffic through the Bab el-Mandeb Strait did drop on Sunday following a Houthi attack on Saudi oil installations along the Red Sea coast.
- Alongside a falling geopolitical risk premium, demand destruction is helping to drag prices lower, with $100 oil already hurting consumption.
- Last week, the EIA reported a decline across the board, which was perhaps one of the first signs of demand destruction kicking in.
Oil prices fell more than 2% on Tuesday as a pause in U.S.-Iran hostilities eased concerns over escalating tensions. The international benchmark for September delivery dropped to $86.52 a barrel, while another benchmark fell to $80.71.1235
The Commonwealth Bank of Australia attributed the decline to a combination of factors, including a decrease in geopolitical risk and demand destruction due to high prices. The bank noted that $100 oil has already begun to hurt consumption, indicating that demand is softening.4910
Despite the recent drop, oil prices remain elevated due to ongoing shipping disruptions in the Middle East, particularly concerning the Red Sea traffic and the Houthis' attempts to control the Strait of Hormuz. The U.S. Energy Information Administration reported signs of demand destruction last week, suggesting that the market is responding to high prices.7
As President Trump mentioned, the U.S. is engaged in "good talks" with Iran, which may further contribute to stabilizing the situation. However, the market remains cautious as geopolitical tensions persist, particularly following recent attacks on Saudi oil installations.
“Oil prices fell to $80.71 a barrel for September delivery, reflecting easing concerns over immediate escalation between the U.S. and Iran. Despite the decline, shipping disruptions in the Middle East continue to elevate prices, particularly with concerns over Red Sea traffic and the Houthis' control over the Strait of Hormuz.”
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