Oil prices dropped early Sunday, moving further from a two-month high as tensions between the United States and Iran eased without military action in the Persian Gulf.
The price of Brent crude for September delivery fell 4.9%, reaching $92.02 shortly after trading opened. This followed a 3.9% decrease on Friday.
Last week, Brent crude briefly reached $102 per barrel, $30 higher than earlier in the month and the highest since May.
The recent surge in oil prices arose from increased Middle East conflict and concerns over disruptions to global oil flows.
The Strait of Hormuz, a crucial passage where a fifth of the world’s oil transits, has faced shipping interruptions due to conflict, spiking market concerns.
Efforts to find alternative shipping routes remain under pressure, with attacks on Saudi oil tankers in the Red Sea last week exacerbating supply worries.
This supply strain has elevated oil prices, leading to higher fuel costs. In the U.S., the average price for a gallon of regular gasoline rose to $4.11, compared to $3.90 a month ago and $3.15 a year ago, according to AAA.
Sustained high oil prices could inflate costs for goods worldwide, impacting groceries and other shipped products.
The economic impact is significant as rising oil prices coincide with an expected interest rate hike by the Federal Reserve, with traders predicting a 36% probability of an increase, according to CME Group data. Higher rates might limit inflation but could also slow economic growth by increasing borrowing costs.
Rising long-term U.S. mortgage rates have already affected the housing market, and increased borrowing costs might curb developments in the artificial intelligence sector, crucial for economic expansion.
While July gains in oil prices have slightly receded, uncertainty persists as the price for a U.S. benchmark oil barrel for September delivery fell 5.6% to $84.34, following a prior 3.1% drop.
Trading remains active, with October Brent crude prices decreasing 4.6% to $87.48, as contracts fluctuate based on future delivery expectations.
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