Oil prices saw their steepest drop in weeks, with WTI crude falling nearly 4% as signs of de-escalation in the Middle East eased fears of a wider supply disruption.
Back
WTI crude falls nearly 4% to $102 as Mideast tensions ease
West Texas Intermediate crude futures tumbled nearly 4% Tuesday as signs of a durable ceasefire in the Middle East and U.S. efforts to reopen a critical shipping lane eased fears of a prolonged supply shock. The reversal erased Monday's gains and sent the U.S. stock market climbing toward record highs.
"Any attacks were all below the threshold of restarting major combat operations at this point," Gen. Dan Caine, chairman of the Joint Chiefs of Staff, said on Tuesday. His comments helped soothe a market that had sent Brent crude leaping 5.8% on Monday after Iran was blamed for attacks against the United Arab Emirates, a development that seemed to place the fragile truce in jeopardy.
The June WTI contract settled down $4.15, or 3.90%, at $102.27 a barrel, a sharp retreat from the prior day's volatility. Brent crude, the international benchmark, fell 3.7% to $110.19. The pullback in oil prices provided a tailwind for equities, with the S&P 500 rising 0.9% to approach a new record. The Dow Jones Industrial Average gained 0.6%, while the tech-heavy Nasdaq Composite added 1.1%.
The key driver for the sell-off in crude is the potential for more supply to come online. U.S. military leaders said a ceasefire with Iran remains in effect and that they are actively working to force open the Strait of Hormuz. Reopening the strait would allow oil tankers pent up in the Persian Gulf to resume shipments, adding barrels to a tight global market and potentially bringing down prices that are still well above the roughly $70-a-barrel level seen before the war began. The drop in crude provided relief for industries with high fuel costs and lessened broader concerns about inflation that have weighed on markets.
This article is for informational purposes only and does not constitute investment advice.
[1] WTI June crude oil futures closed down $4.15, a decrease of 3.90%, at $102.27 per barrel[2] Oil Futures Ease As Market Awaits Hormuz Developments[3] US stocks climb toward records as oil prices fall and earnings beat forecasts[4] Oil Prices Slide but Remain Elevated as Middle East Tensions Escalate[5] Wall Street falls from its records and oil prices jump after fighting flares in the Middle East
