Oil falls over 6% on hopes of breakthrough to end Iran war
Brent crude dropped to $105.55 a barrel, its lowest in more than two weeks, as Tehran said intensive contacts with Washington were continuing.
Oil prices fell to their lowest level in more than two weeks on Monday as traders bet on a diplomatic breakthrough to end the eight-month war between the US, Israel and Iran. Brent crude, the international benchmark, dropped by more than 6.5% to as low as $105.55 a barrel, the weakest since 16 October, according to the Guardian.
The sell-off gathered pace after Tehran confirmed that contacts with Washington were continuing. Iran's foreign minister, Abbas Araghchi, said consultations through mediators were very intensive, adding that Tehran had presented its conditions and proposals and that everything now depended on Washington's political rationality, according to the state media outlet IRNA.
Investors were also cheered by reports that Iran's supreme leader, Mojtaba Khamenei, had granted "powers" to his government in the talks. Over the weekend, Qatari officials attempted to negotiate the release of more than $6bn (£4.5bn) in Iranian assets in the hope that Tehran would allow the strait of Hormuz to reopen. The shipping lane has been largely closed since the US and Israel attacked Iran earlier this year.
Donald Trump struck a harder line on the campaign trail, telling voters in Iowa on Sunday that Iran would receive "the hammer" without progress, while saying he wanted to "save all those lives if I can" ahead of the US midterm elections.
Cheaper oil fed straight through to markets. The yield on 10-year UK government bonds fell 10 basis points to its lowest since 22 September, easing state borrowing costs, while airline shares jumped on the prospect of lower fuel bills: British Airways' parent company IAG rose 4.2% in London and United Airlines climbed 7% in New York.
Chris Beauchamp, chief market analyst at the trading platform IG, called the news "manna from heaven for stock markets", but cautioned that "there is still a risk that Trump will try one last throw of the iron dice after the midterms". The fall in crude has raised hopes of relief from the inflationary pressures gripping the global economy — though a failed negotiation could send prices snapping back. The next test comes with the US midterm vote, after which traders will watch whether the back-channel contacts harden into a deal to reopen Hormuz.
Sources
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