Oil prices eased in early trading Sunday, falling further from a two-month high set last week, after the United States and Iran refrained from launching military strikes in the Persian Gulf for a second straight day.
The price for a barrel of Brent crude oil to be delivered in September dropped 4.9% to $92.02 shortly after trading resumed. The decline followed a 3.9% drop on Friday.
Brent crude, the international standard, briefly hit $102 a barrel last week. That was $30 more than the most actively traded contract in the Brent market was going for early in the month, and the highest it had been since May.
Oil prices surged this month because of increased fighting in the Middle East and worries a return to all-out war would further slow the global flow of crude.
The ability of tankers to pass safely through the Strait of Hormuz has been the central concern for the oil market since the U.S. and Israel attacked Iran in late February. The narrow strip of water off Iran’s coast is the route through which a fifth of the world’s oil typically leaves the Persian Gulf and heads to customers worldwide, and the conflict has largely halted shipping traffic.
Oil producers have since searched for alternative routes, but those are under pressure too. Last week, attacks hit Saudi oil tankers that were using the Red Sea to leave the region. When less oil is available for customers to buy, the price goes up and fuel prices do as well.
In the United States, the average price for a gallon of regular gasoline on Sunday was $4.11, up from $3.90 a month ago and just $3.15 a year ago, according to motor club AAA.
If oil prices stay elevated, it could lead to higher prices for every product that gets shipped, trucked or flown around the world, including groceries. Although the U.S. economy continues to grow, the ongoing conflict with Iran has dragged consumer confidence in it lower.
The reacceleration of oil prices this month took place just as inflation had begun to slow more than economists expected. Now, traders believe inflation pressures have grown enough that they’re betting on a 36% chance the Federal Reserve will hike its main interest rate at an upcoming meeting, according to data from CME Group.
Higher interest rates would help keep a lid on inflation, but they could also slow the economy by making it more expensive for all kinds of Americans and businesses to borrow.
Long-term U.S. mortgage rates have already hit their highest levels in nearly a year, for example, chilling the housing industry. And more expensive borrowing could slow the boom in building artificial-intelligence data centers, which have become a big engine for the U.S. economy's growth.
While oil prices have given back some of their big July gains, much uncertainty still remains.
The price for a barrel of benchmark U.S. oil to be delivered in September fell 5.6% to $84.34 on Sunday. It dropped 3.1% on Friday.
In the oil market, traders are buying and selling contracts for barrels of oil to be delivered many months in the future. The price for a barrel of Brent crude to be delivered in October, which is now the most actively traded part of the market, fell 4.6% to $87.48.