Oil surrendered some hefty gains as many doubted Iran would strike back in a way that would disrupt supplies, and its own crude exports.
Yet US Defense Secretary Mark Esper told Pentagon reporters that no decision had been made and the military said the letter was only a poorly worded draft. Surveys of service sectors out overnight showed some improvement in the United States, UK and EU, stirring speculation the closely-watched ISM measure of US services due later Tuesday will also show strength.
"But while the risk of conflict has increased, the reality is this is likely to be limited to proxy skirmishes," he argued. "The risk of a "hot" conflict seems low as Iran is unlikely to respond in such a way that risks a significant escalation from the United States."