Oil down as traders weigh US sanctions threat against Iran

Oil prices plunged below US$90 a barrel on Tuesday (Aug 25) as traders assessed the likelihood of U.S. military strikes against Iran, following the threat of broader economic sanctions. However, the measures were milder than anticipated and were accompanied by positive discussions between Pakistan and Iran. Treasury Secretary Scott Bressent asserted that the U.S. was declaring an "economic D-Day" against Iran and its trade partners, but provided no specific timeline for the new sanctions or named additional countries to be penalized.

The news helped ease oil market tensions, with Brent crude dropping more than three percent and the international benchmark Brent falling below the US$90 threshold. Wall Street stocks closed higher, with the S&P 500 rising 0.3 percent. However, analysts cautioned that markets might be overlooking the U.S.-Canada trade war, as Canada imposed counter-tariffs ranging between 15 and 50 percent on US goods.

Major European markets also saw gains, with some relief observed due to the limited economic pressure on Iran. Investors are now focusing on Nvidia's earnings report on Wednesday, as the company's performance is seen as a key indicator of the AI boom.