Oil drops 7.9%, stocks rise as peace talks unsettle energy prices and rate expectations

U.S. West Texas Intermediate (WTI) crude oil prices fell 7.9% to $91.28 per barrel as signals of impending peace talks between the U.S. and Iran reshaped market expectations. Brent crude dropped 4.6% to $94.79. The sharp decline in energy prices eased near-term inflation pressures, a shift that typically would support the Federal Reserve’s case for lowering interest rates. Instead, the drop is feeding uncertainty about the timing of those cuts. The 10-year U.S. Treasury yield fell to 4.24%, and the 2-year yield declined to 3.74%, reflecting recalibrated expectations. The dollar index slipped to 97.92. Federal Reserve Bank of Chicago President Austin Goolsbee warned that inflationary disruptions, even if partially reversed by falling oil prices, could delay appropriate rate cuts. The market’s relief is real. Its assumption that lower energy prices mean looser monetary policy may not hold.