Oil prices fall about 2% as slowdown fears outweigh US-Iran tensions

Oil prices fell about 2% Thursday despite ongoing US-Iran tensions, as concerns over weakening crude demand tied to a global economic slowdown took center stage.

Brent crude futures for September delivery settled down 2.20% at $76.30 a barrel on the London ICE Futures Exchange on Thursday (local time).

West Texas Intermediate crude futures for August delivery fell 1.96% to close at $72.08 a barrel on the New York Mercantile Exchange.

Markets focused less on geopolitical risk in the Middle East and more on the possibility that a global slowdown could erode crude demand.

Minutes from the US Federal Reserve's June Federal Open Market Committee meeting, released Thursday, showed that inflation concerns remain significant. Markets read the release as a signal that the Fed could keep interest rates elevated for an extended period or pursue further rate hikes — a prospect that reinforced expectations of slower economic growth and weaker oil demand.

Chinese economic data also dampened investor sentiment. China's producer price index rose 4.1% year-on-year in June, its highest increase in about four years, stoking concerns that rising costs for manufacturers could weigh on the domestic demand recovery. That clouded the demand outlook for the world's largest crude importer.

However, supply disruption fears limited the scale of the decline.

Continued military exchanges between the United States and Iran have delayed the normalization of shipping through the Strait of Hormuz, reducing crude flows, while Ukraine's drone strikes and Russia's restrictions on diesel fuel exports added further supply uncertainty.

Ultimately, while geopolitical risk still provided some underlying support, fears of slowing demand proved stronger, pushing oil prices lower on the day.