Oil slips as US shifts Iran strategy to sanctions

Oil prices fell for a second day on Tuesday as traders judged the risk of renewed military strikes on Iran to have receded, after the United States instead threatened broader economic sanctions. Treasury Secretary Scott Bessent declared an "economic D-Day" against Iran, but the US gave no timeline for its new sanctions and did not name any other countries to be punished beyond Iran, according to multiple reports.

Brent crude fell 3.6% to $87.27 a barrel, marking a second decline following 13 gains in 14 days, as reported by the Los Angeles Times. Earlier on Monday, Brent traded at $92.74 a barrel, down from $93.53 late Friday, according to LBC. The drop came even as tensions between Washington and Tehran appeared to ratchet higher following the announcement of new sanctions.

Analysts noted the shift in approach. "There may be some relief that the threats have moved from military strikes to some form of super sanctions, but there is little confidence that a route to a peace deal will open up any time soon," said Susannah Streeter, chief investment strategist at Wealth Club, in remarks carried by both LBC and Bangkok Post.

Neil Wilson, investor strategist at Saxo UK, said there was "relief from the lack of any material increase in the economic pressure on Iran," as quoted by France 24.

Diplomatic efforts and market reaction

The US move came alongside renewed shuttle diplomacy. Pakistan Interior Minister Mohsin Naqvi reported a "very positive and productive meeting" with Iran's president on Monday, with a Pakistani delegation leaving Tehran on Tuesday after talks on reopening the Strait of Hormuz and reviving negotiations to end the conflict, according to the Los Angeles Times.

Wall Street finished higher on Tuesday, with the S&P 500 rising 0.3% to 7,677.28, the Dow Jones Industrial Average adding 160 points (0.3%) to 53,577.40, and the Nasdaq climbing 0.7% to 26,151.30, as reported by the Los Angeles Times. Earlier on Monday, US stocks had been mixed, with the Dow up 0.3%, the S&P 500 down 0.3%, and the Nasdaq falling 0.6%, according to LBC.

European markets were mixed. London's FTSE 100 closed up 0.4% at 10,854.32, outperforming its peers, while Paris's CAC 40 and Frankfurt's DAX 40 both ended lower, according to LBC and CNA. On Tuesday, major European markets closed higher aside from Paris, which slipped back slightly, France 24 reported.

Bond yields ease as inflation worries recede

The drop in oil prices reined in worries about high inflation, which had helped drive Treasury yields higher through the summer. The yield on the 10-year Treasury fell to 4.63% from 4.70% late Monday and from 4.74% at the end of last week, according to the Los Angeles Times. The Treasury Department had announced a surprise move to increase its repurchases of longer-term bonds after the 30-year yield hit a 19-year high, Bessent said, as reported by France 24 and Bangkok Post.

Other market drivers: Nvidia, trade tensions, and Jackson Hole

Investors were also looking ahead to Nvidia's quarterly results due Wednesday, which analysts said would be a key driver of price action. "Nvidia's results will be a key driver of price action and potential volatility," said Kathleen Brooks, research director at XTB, in remarks cited by France 24 and Bangkok Post. Tom Stevenson, investment director at Fidelity International, said the results would provide insight into the AI "boom or bubble" question, according to LBC.

Trade tensions between the US and Canada also weighed on markets. Canada unveiled counter-tariffs on US goods ranging between 15 and 50 percent, and the Canadian dollar fell, as reported by France 24 and CNA. FHN Financial's Chris Low warned that markets seemed to be shrugging off the US-Canada trade war, saying, "There may be a mistaken belief that because there were already tariffs in place, that it won't make much difference."

The annual Jackson Hole gathering of central bankers begins Thursday, with Federal Reserve Chairman Kevin Warsh due to speak. Citigroup analyst Andrew Hollenhorst said Warsh's discussion on Friday will likely include no explicit guidance, according to LBC. Ipek Ozkardeskaya of Swiss Quote noted that Jackson Hole "could be explosive" given the backdrop of trade tensions and debt levels, as cited by Bangkok Post and CNA.

Corporate news and data

On the FTSE 100, Diageo rose 3% after RBC Capital Markets reiterated an 'outperform' rating, and Diploma gained 0.4% after JPMorgan upgraded it to 'overweight', according to LBC. Whitbread rose 1.6% after the Treasury announced a review into business rates for pubs and hotels in England and Wales. Tracsis rose 4.7% after completing the acquisition of Mistral Data for £48 million and reporting revenue of £85.5 million for the financial year ended July 31, a 4.4% increase.

In the US, Dick's Sporting Goods plunged 30.7% after weaker results and a cut to its forecast, with the company having spent $2.4 billion to acquire Foot Locker last year, according to the Los Angeles Times. Consumer confidence in the US weakened by more than economists expected, according to the Conference Board.

Gold traded at $4,670.28 an ounce on Monday, up from $4,605.34 on Friday, LBC reported.