Oil prices fall for second straight day as US pivots from Iran strike threats to sanctions

Oil prices fell more than three percent on Tuesday, pushing the international benchmark Brent back below $90 a barrel, as traders judged that the threat of fresh military action against Iran had diminished. The decline follows weeks of rising prices driven by a deadlock over reopening the Strait of Hormuz.

Treasury Secretary Scott Bessent declared an "economic D-Day" against Iran and its trade partners, but the administration set no timeline for the new sanctions and did not identify which other countries might be targeted. Analysts described the announced measures as softer than had been anticipated.

The announcement coincided with renewed diplomatic efforts. Pakistan's Interior Minister Mohsin Naqvi described a "very positive and productive meeting" with Iran's president on Monday, expressing hope that the momentum could help pave the way toward lasting peace in the region.

Market reaction

The easing tensions lifted broader markets as well, with the S&P 500 rising 0.3 percent and most major European indices closing higher, apart from Paris, which slipped slightly late in the session. Saxo UK investor strategist Neil Wilson noted that European markets took comfort from the absence of any significant escalation of pressure on Iran. Sentiment was further boosted by German data showing second-quarter economic growth was stronger than previously estimated.

However, FHN Financial's Chris Low cautioned that markets may be underestimating the fallout from the US-Canada trade war, after Canada announced counter-tariffs on US goods ranging from 15 to 50 percent — measures he said are far broader and larger than those previously in place.

What's next

Investors are now watching Wednesday's earnings report from Nvidia, seen as a key barometer for the artificial intelligence sector, as well as the annual Jackson Hole gathering of central bankers, where Federal Reserve Chair Kevin Warsh is scheduled to speak on Thursday.