Oil prices experienced a sharp decline of nearly 5% on Tuesday, following a ceasefire agreement between Israel and Iran after a two-week conflict.
Brent crude, the global oil benchmark, initially plummeted to $68 per barrel before partially recovering. This fluctuation followed mutual accusations of ceasefire violations by both Iran and Israel.
Prior to the ceasefire, prices surged due to concerns about potential disruptions to global oil supplies via a potential blockade of the Strait of Hormuz, a crucial shipping route.
US, UK, and European stock markets reacted positively, remaining steady after President Trump publicly cautioned Israel against further military action following Iran’s alleged ceasefire breach.
Trump had earlier declared the ceasefire “in effect,” a statement subsequently confirmed by Israel.
Oil prices had reached highs of $81 per barrel since the conflict’s onset, fueling anxieties about rising costs of living due to potential increases in fuel and operational expenses.
Crude oil is currently trading at $69.67, slightly below pre-conflict levels from June 13th, when Israeli strikes targeted Iranian nuclear facilities.
Priyanka Sachdeva, senior market analyst at Phillip Nova, commented, “If the ceasefire holds, investors may anticipate a return to normalcy in oil markets.”
However, she cautioned that the commitment of both nations to the ceasefire’s terms will significantly influence future oil pricing.
The initial price drop moderated after Israel accused Iran of violating the ceasefire with a missile strike.
US stock markets opened higher, with the S&P 500 and Dow Jones Industrial Average rising by nearly 0.9%, and the Nasdaq exceeding 1%.
European markets also saw gains, with the UK’s FTSE 100 up 0.4% and Germany’s Dax increasing by 1.7%. Asian markets mirrored this trend, with Japan’s Nikkei closing up 1.1%.
The Middle East conflict had driven up global energy prices, potentially impacting energy bills and fuel costs globally.
Wholesale UK gas prices decreased by 12.5% on Tuesday, following earlier spikes. Qatar, a major supplier of liquefied natural gas transported through the Strait of Hormuz, is significantly impacted.
On Monday, Iran retaliated for US strikes on Iranian nuclear sites with missile attacks on a US military base in Qatar.
The recent oil price increases raised concerns about broader cost-of-living increases, affecting various goods and services worldwide.
This mirrors the global impact experienced following Russia’s invasion of Ukraine three years prior.