U.S. crude oil prices fell 2% on Tuesday, as slowing global demand overshadows tensions between Iran and Israel.

The market has shifted its focus back to fundamentals after the International Energy Agency and OPEC flagged softening consumption in China this week.

Here are Tuesday’s closing energy prices:

  • West Texas Intermediate September contract: $78.35 per barrel, down $1.71, or 2.14%. Year to date, U.S. crude oil has gained 9.3%.
  • Brent October contract: $80.69 per barrel, down $1.61, or 1.96%. Year to date, the global benchmark is ahead 4.7%.
  • RBOB Gasoline September contract: $2.37 per gallon, down more than 6 cents, or 2.79%. Year to date, gasoline is up 12.9%.
  • Natural Gas September contract: $2.15 per thousand cubic feet, down 4 cents, or 1.87%. Year to date, gas is lower by 14.5%.

World oil demand continues to slow as China’s post-pandemic rebound has run its course, according to the IEA. Global demand in the second quarter increased at its slowest pace, 710,000 barrels per day, since the end of 2022, according to the Paris-based agency.

OPEC on Monday lowered its demand growth forecast by 135,000 barrels per day this year citing softness in China. The IEA forecasts a crude oil surplus in 2025 even if OPEC keeps production cuts in place, due to output in Brazil, Canada, Guyana and the U.S.

OPEC 'sticking to their plan' to relax their voluntary cuts, expert says

U.S. crude rallied more than 4% in the previous session as Israel braced for an expected attack from Iran and the Pentagon accelerated the deployment of a carrier strike group to defend its ally.

“The oil market’s concern is that a broader conflict between Israel and Iran could cause oil supply disruptions in and around the Strait of Hormuz, through which about 20% of the world’s seaborne crude supply is shipped,” Henning Gloystein, head of energy at the Eurasia Group, wrote to clients in a note.

“These risks remain low-probability events, which helps explain the modest increase in prices,” Gloystein wrote.

The market is monitoring diplomatic efforts by the Biden administration to avert a wider war in the Middle East, said Helima Croft, head of global commodity strategy at RBC Capital Markets.

“Oil market participants and frankly gas market participants are having to weigh some of the economic data versus some of the supply risk data,” Croft told CNBC’s “The Exchange” Tuesday.

Rob Ginsberg, managing director at Wolfe Research, said U.S. crude has held a floor in the low $70s and now faces a stubborn resistance level of $84 per barrel.

But the U.S. benchmark could break out, Ginsberg told clients in a note. “Once out, mid to high $90s isn’t crazy,” he said.

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