Crude prices fell as markets reassessed how aggressive Washington’s campaign against Iran really is, after Treasury Secretary Scott Bessent said Monday’s sanctions rollout was meant as a warning shot rather than the crippling package initially signaled. The softer framing comes as Tehran has responded with its own tougher rhetoric, including threats to halt oil flow through the Strait of Hormuz and a parliamentary move to charge vessels transiting the waterway.

Brent crude eased to around $93 a barrel and West Texas Intermediate to around $85, extending Monday’s pullback as investors looked past the sanctions announcement rather than treating it as a fresh escalation.

Bessent told CNN that Washington deliberately held back more severe secondary sanctions, describing the action as “a warning shot and a level set of expectations” instead of an immediate maximal push. That is a materially softer tone than the “economic D-Day” language used ahead of the announcement, and it suggests the US is keeping room to escalate further.

Tehran’s response has hardened in parallel. Iran’s Supreme National Security Council secretary, Mohsen Rezaei, threatened to halt oil flow through the Strait of Hormuz entirely and warned neighboring countries that cooperating with the US pressure campaign would face retaliation. Iran’s parliament has separately approved, though not yet finalized, a measure that would require vessels transiting the strait to pay for services provided by Tehran. The waterway is one of the world’s most important oil chokepoints, carrying roughly a fifth of global oil consumption, which gives even procedural steps such as transit-fee proposals significance well beyond the Gulf.

China has become a more important part of the discussion because it buys more than 80% of Iran’s seaborne oil exports and would face the most direct impact from any broader enforcement of secondary sanctions — penalties that reach beyond Iran itself to third-country banks, shippers and buyers that continue doing business with it. Oman’s foreign minister remains scheduled to travel to Tehran on Tuesday for talks on Hormuz security and freedom of navigation.

A separate move in the Treasury market has also begun to unwind, complicating the recent dollar narrative. The Treasury’s plan to at least double long-term bond buybacks — a program used to retire older, less liquid securities — had been credited by HSBC with pushing the dollar to its lowest level since May, but that initial reaction has now reversed. Yields on both 10-year and 30-year notes have rebounded back above pre-announcement levels.

Bessent has responded by floating the use of the roughly $1 trillion Treasury General Account — the government’s operating account at the Federal Reserve — to fund a larger intervention, alongside a broader fiscal consolidation push. Some analysts have questioned the strategy, including Evercore ISI’s Krishna Guha, who described the buyback approach as a weak substitute for genuine fiscal repair that could backfire if markets read it as evidence Washington is struggling to fund itself cheaply.

US equities were mixed. The S&P 500 and Nasdaq Composite fell as chip stocks came under pressure, led by declines in Micron, Advanced Micro Devices and Broadcom. The Dow Jones Industrial Average held a modest gain, supported by defensive and financial shares.

Attention is now turning to Federal Reserve Chair Kevin Warsh’s keynote at the Jackson Hole Economic Policy Symposium on Friday, August 28, his first as Fed chair. The annual Wyoming gathering has historically been a venue where Fed chairs signal shifts in policy direction, and this year it arrives with markets pricing roughly a one-in-three chance of a September rate hike, while most fund managers surveyed expect a neutral tone. That leaves room for a larger market reaction if his remarks differ materially from those expectations.