Oil prices pulled back on Tuesday after Iran and Israel said they had halted their attacks on each other, easing fears of a wider conflict that could choke off Middle East energy supplies. Brent crude slipped below $93 a barrel, retreating from the spike that had gripped markets a day earlier when the two sides traded their heaviest strikes in months.
The reversal followed a volatile Monday session. U.S. benchmark West Texas Intermediate crude had jumped 3.3% to $93.93 a barrel as the weekend escalation revived worries about shipping through the Strait of Hormuz, the waterway through which roughly a fifth of the world's oil passes. With both sides signaling a pause and President Trump declaring peace talks in their "final throes," traders unwound some of that risk premium.
Equities were steadier. On Monday, the S&P 500 added 0.3% to close at 7,405.73 and the Nasdaq composite rose 0.86% to 25,929.66, recovering ground after a sharp selloff late last week, while the Dow Jones Industrial Average slipped 0.16% to 50,786.01. The rebound was led by semiconductor shares that had been hammered in the prior session.
Chip stocks extended their recovery as investors returned to the artificial-intelligence trade that has powered indexes to records this year. The rotation back into technology helped offset the drag from energy-sensitive sectors as crude prices fell.
Analysts cautioned that the calm in oil markets could prove fragile. The Strait of Hormuz has remained effectively constrained during the conflict, and any renewed escalation, particularly a resumption of Iranian strikes if Israel continues its campaign in Lebanon, could quickly send crude higher again.
The crosscurrents left traders weighing two competing forces that have defined the year: an AI-driven equity rally that has repeatedly set records, and a Middle East war that keeps threatening the flow of oil. A sustained drop in crude would ease one of the main inflation risks facing central banks, while a fresh spike would do the opposite.
For now, the market's working assumption is that the latest pause holds and that diplomacy advances, allowing the risk premium built into oil over recent days to continue draining away. But with the ceasefire conditional and the situation in Lebanon unresolved, energy desks remained on alert for the next headline out of the region.