Brent crude dropped 4.1% to $92.82 a barrel after the US and Iran paused their military strikes, easing fears of an immediate supply disruption. The decline comes just days after the benchmark settled at $100.69 on July 23, when Houthi attacks on two Saudi oil tankers had pushed prices higher.
Why the fighting stopped
The halt in strikes between Washington and Tehran removed the most acute risk premium from the market. Traders had been pricing in the possibility of a broader conflict that could choke off shipments from the Persian Gulf. The Houthi attacks on the Saudi tankers had already demonstrated how quickly regional tensions can translate into higher crude costs. With no new military action reported, the market recalibrated.
Inflation data adds a new variable
At the same time, the US Bureau of Labor Statistics reported that the Consumer Price Index fell 0.4% month-over-month in June. The energy index dropped 5.7%, and gasoline prices tumbled 9.7%. That’s the kind of headline relief central bankers have been waiting for — but it comes with a catch.
Energy prices feed into headline CPI quickly, but core inflation — which strips out food and energy — takes longer to respond. Shelter costs and wage growth remain sticky, meaning the Federal Reserve and other central banks can’t declare victory yet. If energy-driven softness persists, they may ease policy, but core inflation and labor data are still the main determinants.
The Hormuz wild card
Goldman Sachs has laid out a scenario where disruptions at the Strait of Hormuz could push Brent above $120 in the fourth quarter. That’s not the base case, but the risk hasn’t disappeared just because the strikes paused. The Houthi attacks on the Saudi tankers showed that non-state actors can still rattle the market even when major powers step back.
Oil’s path from here depends on whether the US-Iran truce holds and whether the Houthis strike again. The next CPI report, due in August, will show whether the energy-led decline in June was a one-off or the start of a trend. Central banks will be watching both the oil price and the core inflation numbers before making their next move.
