Oil Holds Near $94 as Iran and Israel Step Back From the Brink

Israel and Iran paused their attacks on Monday after a sharp escalation in strikes that followed the ceasefire reached two months ago. Oil prices fell in response and continued to decline on Tuesday. Brent crude, which rose above $98 a barrel as the strikes escalated, first eased back toward $94 after Tehran said it had stopped its military operations, then fell about 3 percent on Tuesday to near $91.50 after the United States Energy Secretary said ship traffic through the Strait of Hormuz was increasing and President Donald Trump said an agreement with Tehran was days away.

Iran described the halt as conditional. It warned it would resume strikes if the Israeli military continued attacking southern Lebanon. Israeli Prime Minister Benjamin Netanyahu said the fighting there was contained, but he did not confirm a ceasefire, and his military issued fresh evacuation orders for the city of Tyre and surrounding areas in Lebanon.

A central question for global growth is why oil prices never reached the levels that a closure of the Strait of Hormuz would imply, and the reported increase in shipping traffic reinforces that restraint. Al Jazeera's analysis attributes it to spare production capacity within the Organization of the Petroleum Exporting Countries and its allied producers (OPEC+), which approved a further July output increase of 188,000 barrels a day. It also points to traders' judgment that neither side wants to disrupt the Persian Gulf shipping that funds both economies.

For readers focused on monetary stability, the more telling signal appears in the assets that investors use to hedge monetary and geopolitical risk. Gold traded near $4,358 an ounce, up about 0.6 percent on the day, holding the elevated range it has occupied throughout the conflict. Crude that remains in the low $90s with an added conflict premium continues to feed imported inflation across energy-dependent economies, even as central banks insist price pressures are fading.