Oil prices tumble, stock set to rise amid pause in U.S.-Iran fighting

Oil prices tumbled on Monday and the U.S. stock market was poised to rise amid a pause in fighting between the U.S. and Iran, with U.S. Ambassador to the United Nations Mike Waltz saying Sunday on "Face the Nation with Margaret Brennan" that the break is aimed at "giving diplomacy some space."

Brent crude, the international benchmark, fell $6.35, or 6.6%, to $90.41 a barrel, while the U.S. benchmark, West Texas Intermediate, slipped 5.7% to $84.23. 

U.S. stocks were set to rise sharply in early trading on Monday, with futures for the S&P 500 and Dow Jones Industrial Average pointing to a rise of 1%. 

The drop in oil prices comes just days after the commodity surged to more than $100 a barrel, sending gas prices above $4 a gallon and raising concerns about resurgent inflation. The renewed focus on diplomacy sent relief through the global markets, with European and Asian markets also rising on Monday.

"Oil's sharp retreat at the Monday open did more than knock a few dollars off the barrel. It loosened the geopolitical knot that had been tightening around equities, currencies, bonds and central banks for most of July," Stephen Innes of SPI Asset Management said in a commentary.

Waltz said on "Face the Nation" that the pause in Middle East fighting is giving diplomacy "a little bit of time" to work, although he added that more U.S. military assets are still "moving into the region." 

The Iranian regime insisted Monday that it is not engaged in any direct talks with the U.S. But after three nights of relative calm, it acknowledged ongoing talks with Oman aimed at establishing "mechanisms regarding maritime traffic" in the Strait of Hormuz. 

Recent surges in energy prices and fresh tariffs announced last week by the Trump administration could result in hotter inflation, complicating the outlook for the Federal Reserve's interest rate policy. 

While the Fed is expected to leave interest rates unchanged at its latest meeting on Wednesday, rising oil prices have prompted investors to sharply increase their bets that a fresh rate hike could come later this year.

Edited by Alain Sherter

The Associated Press contributed to this report.

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