Oil prices have continued their descent towards levels last observed before the Iran war, following the US decision to waive sanctions on Iranian oil amidst progress in peace negotiations.
Brent crude saw a nearly 2 per cent drop in morning trading on Tuesday, reaching 76.4 US dollars a barrel. This marks a new low since early March and brings the price closer to the 72 dollars a barrel recorded before the US-Israel war on Iran commenced on 28 February.
The latest decline is directly linked to the US Treasury’s issuance of a 60-day licence, which waives sanctions on Iranian oil as part of an interim agreement to end the conflict, thereby allowing Iranian oil to re-enter the US market.
US Vice President JD Vance stated that extensive discussions with senior Iranian officials in Switzerland have established a "good foundation" for a comprehensive final peace deal, as both nations seek a permanent resolution to the war.
An interim peace deal, lasting 60 days, was signed last Friday. However, negotiations for a long-term agreement were initially hampered by ongoing clashes between Israel and Iran-backed Hezbollah militants in southern Lebanon.
The global relief from lower crude costs is anticipated, given the significant surge in wholesale oil and energy prices since the conflict began.
Oil prices hit 120 dollars a barrel at one stage as the vital Strait of Hormuz was effectively blocked, closing a shipping route that normally carries a fifth of the world’s oil and gas supplies.
The interim peace deal sees Iran agree to reopen the strait and it is understood that dozens of ships passed through it over the weekend, though the main route is still mined and closed.
But in the wider financial markets, stocks came under pressure after heavy falls overnight on Wall Street and Asia after Elon Musk’s recently-floated SpaceX saw heavy share price falls.
The FTSE 100 Index in London was 0.9% lower at 10342.06 in early trading on Tuesday, following a 16% drop for SpaceX on America’s Nasdaq.
Chris Beauchamp, chief market analyst at IG, said: “SpaceX’s reversal has arrived, bringing the shares back down to earth and causing euphoric sentiment to sputter.
“And just as inevitably, the losses are of such a size that they cannot be ignored by the broader market.”
He added: “It is a necessary corrective in sentiment, and should in theory make the shares even more attractive, but emotions don’t work like that.
“Instead of hopes that the shares will keep rocketing, we have the fear that they will go down even more.”
