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Brent falls to two-week low as US-Iran peace talks advance
Brent crude fell by more than 6.5% to $105.55 a barrel, its lowest level in over two weeks, as investors responded to signs that Iran and the United States may be making progress towards ending their eight-month war. The fall lifted airline shares and lowered government borrowing costs, while raising hopes of relief from inflationary pressures linked to higher energy prices.
Iran’s foreign minister said talks through mediators were continuing, and reports said Iran’s supreme leader had given the government powers in negotiations. Qatar had also sought the release of more than $6bn in Iranian assets in connection with reopening the Strait of Hormuz. The 10-year UK bond yield fell 10 basis points to its lowest since 22 September; IAG shares rose 4.2% and United Airlines gained 7%. Donald Trump had warned Iran could face further action if talks failed, leaving uncertainty over whether a breakthrough will be reached.
In short
- Brent crude fell more than 6.5% to $105.55 a barrel.
- Reports of continuing US-Iran talks boosted market hopes.
- Airline shares rose as bond yields and oil prices fell.
Steelman: both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
Those who welcome the prospect of a deal can argue that diplomacy offers the best chance to end the war, reduce risks to shipping and bring down energy costs. Lower oil prices could ease inflation and borrowing pressures while helping households and businesses, including airlines, plan with greater certainty.
The case against
Sceptics can argue that a fall in oil prices on signs of progress may get ahead of events: talks are continuing, a breakthrough is uncertain, and the US has threatened further action if negotiations fail. A deal that eases pressure on Iran through the release of frozen assets could also be questioned if it does not secure a durable end to the conflict and reliable access through the Strait of Hormuz.
Explained simply
Brent is a widely used benchmark for the price of crude oil, the raw material used to make petrol, jet fuel and other products. Oil prices can affect transport costs and the wider cost of living, while also influencing the finances of energy producers and businesses that use large amounts of fuel.
The United States and Iran have a long-running dispute, including over Iran’s nuclear programme and regional influence. The Strait of Hormuz, a narrow shipping route beside Iran, is important because a significant share of the world’s oil supply passes through it.
The two countries can communicate through mediators, and any agreement could affect sanctions on Iran and the movement of oil and other goods. The prospect of reduced disruption can influence energy markets, but the outcome depends on whether negotiations produce an agreement.
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Originally published by The Guardian as “Oil price falls amid hope of a breakthrough to end Iran war”.