Oil price dives as US and Iran pause attacks
The price of oil fell more than 9 percent on Monday on hopes that a pause in attacks between the United States and Iran could help resolve the dispute.
Brent crude oil, the global benchmark for oil, fell below $88 per barrel, marking a sharp turnaround from last week when it rose above $100.
The drop came after the US ambassador to the UN said attacks on Iran had been halted for a second night in a row to “make some room for talks”.
An Iranian military spokesman said on Sunday that Tehran had stopped “retaliatory” attacks in the region in response.
The outbreak of the Iran war triggered a sharp rise in oil prices, while leading to the effective closure of the Strait of Hormuz, a key shipping route that usually carries around 20% of the world’s oil and liquefied natural gas (LNG).
When Iran and the United States signed a memorandum of understanding in June to halt military operations and reopen the strait, the price of oil fell to pre-war levels of around $70 a barrel.
But the collapse of the ceasefire earlier this month reignited fears about global energy supplies and pushed oil prices back up.
Last week, it reached $100 a barrel for the first time since May, as concerns grew after Yemen’s Houthi militia attacked oil tankers in the Red Sea, threatening a key export route that Saudi Arabia uses to bypass the Strait of Hormuz.
Susannah Streeter, Wealth Club’s chief investment strategist, said markets remained “cautious given the ups and downs during this conflict.”
Despite the sharp decline in crude oil, “there is still significant uncertainty at these prices and reticence as to whether negotiations will result in a lasting breakthrough,” he added.
The conflict between the United States and Iran and its impact on oil has increased the cost of fuels such as gasoline and diesel in many countries.
This often has knock-on effects on other prices, such as food, as businesses pass on the high costs they face to their customers, which can increase the inflation rate.
