Oil prices have fallen sharply amid hopes that a pause in attacks between the US and Iran could reduce tensions in the conflict, according to BBC News.
Brent crude, the international oil benchmark, dropped by more than 9% at one stage to $87.59 a barrel. The move marked a reversal from last week, when prices climbed above $100.
The fall followed comments from the US ambassador to the UN that attacks on Iran had stopped for a second consecutive night to give “talks some space”. An Iranian army spokesperson said on Sunday that Tehran had also halted “retaliatory” attacks in the region.
Oil prices had risen sharply after the war led to the effective closure of the Strait of Hormuz, a major shipping route that normally carries about 20% of global oil and liquefied natural gas. Prices had previously returned to about $70 a barrel after Iran and the US signed a memorandum of understanding in June to stop military operations and reopen the strait.
The breakdown of the ceasefire earlier this month renewed concerns about global energy supplies. Prices reached $100 a barrel last week for the first time since May, with further worries after Houthi militia in Yemen attacked oil tankers in the Red Sea.
Susannah Streeter, chief investment strategist at Wealth Club, said markets remained cautious because of the conflict’s “twists and turns”. She added that uncertainty was still reflected in prices and that investors were hesitant over whether negotiations would produce a lasting breakthrough.
Gas markets have also come under pressure. BBC News cited analysis from Wood Mackenzie which said European gas storage was at a historic low and that winter supply security was “at risk”. Massimo Di Odoardo, vice president of gas and LNG research at Wood Mackenzie, said low inventories, strong Asian demand and limited new LNG supply growth almost guaranteed elevated prices through winter and into 2027.
The conflict has also increased petrol and diesel costs in many countries, with possible wider effects on prices and inflation. The Bank of England is due to hold its latest rate-setting meeting this week and is expected to leave its key rate unchanged at 3.75%.
