Oil price falls amid hope of a breakthrough to end Iran war
Oil prices fell to their lowest level in over two weeks on Monday amid new hopes of a breakthrough to end the Iran war.
Brent crude, the international benchmark, dropped to as low as $105.55 a barrel, the lowest since October 16. The decline sent airline company shares higher and pushed down government borrowing costs.
Oil prices fell after Tehran revealed that contacts between Iran and the United States to end their eight-month war are continuing through mediators.
Diplomatic efforts
Iranian foreign minister Abbas Araghchi said consultations through mediators are 'very intensive,' with Iran having presented its conditions and proposals. Over the weekend, Qatari officials attempted to negotiate the release of more than $6 billion in Iranian assets to facilitate the reopening of the Strait of Hormuz.
Market reaction
The drop in oil prices sparked hopes of relief from inflationary pressures affecting the global economy. The yield on 10-year UK bonds fell 10 basis points to its lowest since September 22. Shares in British Airways' parent company IAG rose 4.2% in London, while United Airlines jumped 7% in New York.
The news is manna from heaven for stock markets, which have felt increasingly pressured by oil's rise, but of course there is still a risk that Trump will try one last throw of the iron dice after the midterms.
Investors were encouraged by reports that Iran's supreme leader Mojtaba Khamenei had granted 'powers' to his government in talks with the US. However, IG's chief market analyst Chris Beauchamp warned that 'there is still a risk that Trump will try one last throw of the iron dice after the midterms.'
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