Oil prices fall below $100 a barrel on hopes of Iran peace deal | Oil
Oil prices fell below $100 a barrel on Monday and stock markets rose on hopes that the United States and Iran are inching closer to a peace deal.
Brent crude futures, the global oil benchmark, fell 6% to $97.43 a barrel, a two-week low, on hopes a deal could be reached to end the US-Israeli nearly three-month war against Iran.
But while a framework is being negotiated, the United States and Iran remain at odds on key issues such as Iran’s blockade of the Strait of Hormuz. An Iranian government spokesman warned that a deal was “not imminent.” The de facto closure of the strait caused energy prices to rise after the United States and Israel launched their first missile attack on Tehran on February 28.
“We’ve been at this stage before, just for the talks to conclude. So the market will probably be more cautious about overreacting,” Warren Patterson, head of commodity strategy at ING, told Reuters.
Even if the strait reopens, analysts say it will take months to return to normal oil flows while damaged energy infrastructure in Qatar and elsewhere is repaired. Last week, Barclays stuck to its forecast for an average Brent crude oil price of $100 this year but said there were risks it could be higher.
Two tankers carrying liquefied natural gas left the strait on Monday and headed for Pakistan and China, while a supertanker carrying Iraqi crude oil set out from the Gulf for China on Saturday after being stranded for almost three months, Reuters reported, citing shipping data.
UBS analyst Giovanni Staunovo said: “We continue to believe that physical oil flows should be the key factors for the oil market to monitor, and so far flows through the strait have been limited.”
Despite Monday’s drop, oil prices remain much higher than before the Iran war, when Brent crude was trading at around $70 a barrel.
Japan’s Nikkei index rose nearly 3%, while the pan-European Stoxx 600 index rose 1%. Many markets, including the US and UK, were closed on Monday for a public holiday. Stocks have largely shrugged off fears about the consequences of the war on the world economy and are more focused on the AI boom and strong corporate profits.
The dollar lost 0.3% against a basket of major currencies on Monday. Sterling rose almost 0.6% to $1.3506, its highest level since mid-May.
Gold rose 1.46 percent to $4,574 per ounce.
Independent analyst Stephen Innes said: “Treasury [bond] Futures rallied, gold climbed and stock futures rose as investors began pricing in the possibility that the world’s most dangerous energy crunch could soon reopen to something resembling normal flow.
“The market reaction was perfectly reasonable given how inflation fears and hawkish rate pricing entered the curve during the last energy shock.”
Inflation fears have increased worldwide due to the high cost of oil, gas and many other materials, including fertilizer. This is expected to cause food prices to rise sharply in the coming months.
As a result, central banks’ expectations for interest rate cuts before the Iran war were quickly replaced by interest rate hike predictions. Markets expect the Bank of England to raise interest rates twice this year.
