Oil Eases Toward $93 as Iran and Israel Halt Direct Strikes

Crude oil prices fell on Monday as Iran and Israel paused their direct attacks following a sharp escalation over the weekend. Brent crude fell about 0.9 percent to roughly $93.30 a barrel and West Texas Intermediate traded near $90, as traders unwound part of the risk premium that fears of a wider conflict had added to prices.

The decline reframes a question that has concerned the world economy since the spring. Al Jazeera's business program asked why oil had stayed near $100 a barrel through months of confrontation, and the answer was that the Strait of Hormuz, the channel for a large share of seaborne crude, never closed. With Iran and Israel reducing hostilities, analysts now consider a near-term disruption of the strait unlikely, which removes the most severe scenario from price forecasts even though the conflict remains unresolved.

The relief is partial. Energy at this price still adds directly to the cost of producing and transporting other goods, which keeps consumer prices rising while growth slows. That combination limits the options available to central banks. Cutting interest rates risks entrenching inflation that comes from the supply side, and keeping rates high to counter it further slows output. In other words, the price of oil is producing effects that monetary policy cannot easily reverse.

The pause itself is conditional. Iran has said it will resume strikes if Israel continues operations against Hezbollah in Lebanon, and Israeli forces struck the Lebanese city of Tyre on Monday. That leaves the supply outlook dependent on a fragile and reversible understanding.