Oil drops 3% as U.S. shifts to economic pressure on Iran, easing fears of renewed war

Oil prices fell more than 3% on Tuesday as the U.S. has pivoted to economic sanctions rather than military strikes to pressure Iran.

Brent futures, the international benchmark, fell 3.2% to $89.20 per barrel. U.S. West Texas Intermediate crude

 was down 3.3% at $82.21 a barrel.

Prices have fallen more than 5% this week, after the U.S. government unveiled a fresh raft of sanctions on Iran and so-called “enablers” that continue to trade with the Islamic Republic.

The White House has labeled its efforts an “economic D-Day,” with Treasury Secretary Scott Bessent claiming the campaign is “the single greatest financial offensive ever.”

Meanwhile, the State Department is preparing to return evacuated U.S. diplomats to the Middle East as early as this week, according to The New York Times. The return of diplomats to their posts would suggest the Washington is not anticipating a return to all-out warfare.

But U.S. Defense Secretary Pete Hegseth told reporters on Monday that the prospect of further American strikes in the Middle East remained on the table.

“If we need to use kinetic strikes, we’ll use them,” he said. “If Iran is foolish enough to overplay their hand or mess with the American military, we’ll do what we need to do.”