Oil futures fell sharply on Tuesday, with both Brent and U.S. crude dropping roughly 3% as immediate tensions between Iran and Israel appeared to cool.
The slide followed a high-profile warning from President Trump to Israel and the announcement of a ceasefire; however, analysts caution that questions about how and when it will be implemented still linger.
Prices had climbed about 10% since mid-June when fighting intensified, driven by concerns over potential supply disruptions from Iran — a producer of roughly 3.3 million barrels per day — and the possibility of the strategic Strait of Hormuz being closed.
Market observers say a closure of the strait remains unlikely, but if it were to occur, it could send oil above $100 per barrel. The International Energy Agency currently maintains emergency reserves of approximately 1.2 billion barrels that can be released if necessary.