Oil prices fall to lowest since August as Trump says Iran war is effectively over

Oil prices drop

Brent crude, the global oil benchmark, fell nearly 3% to $89.66, the lowest since 31 August, on Tuesday morning, after US President Donald Trump downplayed the need for military action against Iran “at this point”. The fall came after a near 6% drop on Monday on signs that the conflict might be nearing an end.

During a White House press conference, Trump said Israel and Gulf allies in the region were well protected from Iran and an escalation was not needed.

“At this point, taking the military action doesn’t seem to be a very necessary thing – but we’re locked and loaded, ready to go for any reason,” he told reporters during a briefing at the White House.

Market reaction

Europe’s benchmark Stoxx 600 index gained 0.9% to 662.54, hovering near a record high, which it had hit in early August on hopes for a peace deal in the Middle East.

In London, the FTSE 100 index climbed 45 points, or 0.4%, to 10,828. The oil companies BP and Shell were the biggest losers, down 1.7% and 1.5% respectively.

Airline stocks rose amid hopes that easing tensions could lead to lower fuel costs, with Lufthansa 1.8% ahead and Air France-KLM up 1.2%.

Broader context

Daniela Hathorn, a senior market analyst at the trading platform Capital.com, said: “Global markets are extending their recovery this morning after Wall Street recorded a strong session that was relatively broad-based, supported by a sharp decline in oil prices and renewed buying in technology stocks.”

Hathorn added: “Ultimately, markets are benefiting from an improvement in the geopolitical outlook, but the underlying macroeconomic and corporate risks remain unresolved. Lower energy prices could help ease inflation expectations, but the Fed will need evidence of broader disinflation before reconsidering its policy stance.”

The latest US inflation data for October will be released at 1.30pm GMT.

Drivers will hope the fall in wholesale oil prices continues to feed through to prices at the pump.

The AA said on Monday at the average UK petrol price had fallen 5p a litre since early October, to 169.7p a litre, and that wholesale markets indicated that another 10p reduction should be on the way.

Why it matters

The drop in oil prices reflects market relief that the Iran war may be de-escalating, while lower energy prices could help ease inflation expectations. However, analysts caution that the Federal Reserve will need evidence of broader disinflation before reconsidering its policy stance, and underlying macroeconomic and corporate risks remain unresolved.

Sources

• cnn.com: Trump’s peaceful mood doesn’t fully explain why energy prices are plunging | CNN Business
• theguardian.com: Oil prices fall to lowest since August as Trump says Iran war is ‘effectively over’ | Oil | The Guardian

This article was drafted with AI assistance and checked against the sources above. Company claims are reported as claims. Cover image is AI-generated.