Oil Prices Drop After US and Iran Stop Attacks for Two Days

Oil prices fell on Sunday after the United States and Iran did not attack each other for two days in a row. The price of a barrel of Brent crude oil — the type used as a worldwide measure — dropped nearly 5% to about $92. That followed another drop of almost 4% on Friday. The two-day pause in fighting gave oil markets a chance to calm down after a very tense few weeks.

Oil prices had shot up sharply earlier this month because of increased fighting in the Middle East. Just last week, Brent crude hit $102 a barrel — the highest price since May. That was about $30 more per barrel than it was at the start of the month. Traders grew worried that a full-scale war could stop oil from moving around the world.

A big reason for that worry is a narrow waterway called the Strait of Hormuz. It sits off the coast of Iran, and about one-fifth of all the world's oil passes through it every day. Since the United States and Israel attacked Iran in late February, shipping traffic through that area has mostly stopped. Oil companies have been searching for other routes to deliver their oil, but those paths have run into problems too.

Last week, oil tankers using the Red Sea were also attacked. The Red Sea is another key route that ships use to carry oil out of the Middle East. When important shipping routes are blocked or attacked, less oil reaches buyers around the world. That pushes prices higher, and when oil prices rise, people pay more for gasoline and many other goods.

In the United States, the average price for a gallon of regular gasoline on Sunday was $4.11. That is up from $3.90 just one month ago and much higher than the $3.15 people paid a year ago, according to the motor club AAA. If oil prices stay high, it could mean higher prices for almost everything — from groceries to electronics — because most goods are shipped by trucks, planes, or boats that run on fuel.

The rise in oil prices is also making people worried about inflation. Inflation means that prices for everyday things keep going up. Just recently, inflation had started to slow down, which was good news. But the spike in oil prices may have reversed that progress, and some traders now think the Federal Reserve may raise interest rates at its next meeting.

When the Federal Reserve raises interest rates, borrowing money becomes more expensive. This can slow the economy because people and businesses spend less. Long-term home loan rates have already reached their highest levels in nearly a year. Higher borrowing costs could also slow down the building of new artificial intelligence data centers, which have become a major driver of U.S. economic growth.

Even though oil prices have dropped a little from their highest point, there is still a lot of uncertainty. The price of U.S. benchmark oil fell about 5.6% to $84.34 on Sunday. Traders in the oil market buy and sell contracts for oil that will be delivered months in the future, so what happens next in the Middle East could push prices up or down again. Many experts are watching closely to see whether the pause in fighting will hold.