Oil Markets Stabilise as Iran Israel Ceasefire Takes Hold

Oil prices have witnessed a significant decline following growing confidence in the Iran-Israel ceasefire, dispelling earlier concerns about potential supply disruptions. Brent crude, the global benchmark, dropped 5.9 per cent to $66.39 per barrel on Tuesday evening, marking a substantial retreat from Monday morning’s peak of $81 per barrel.

The impact reverberated through financial markets as European gas prices fell more than 10 per cent, reflecting diminished fears of Iran potentially blocking the strategically vital Strait of Hormuz. This crucial maritime passage facilitates approximately one-fifth of global oil supplies and liquefied natural gas exports.

British energy giants felt the immediate effects, with BP and Shell experiencing notable declines of 4.77 per cent and 3.71 per cent respectively on the FTSE 100. The anticipated reduction in profits from lower oil prices drove this downward pressure. Conversely, airline stocks rallied impressively, with easyJet surging 6.4 per cent and British Airways owner IAG climbing 6 per cent, buoyed by prospects of reduced fuel costs and improved Middle East flight safety.

The market’s positive response followed Iran’s relatively measured retaliation against a US military base in Qatar, rather than the feared blockade of the Strait of Hormuz. This development, coupled with the subsequent ceasefire announcement, triggered a significant sell-off in oil markets.

Mukesh Sahdev, global head of commodity markets at Rystad Energy consultancy, suggests oil prices may stabilise around the $70-per-barrel mark, contingent upon the emergence of a clear US-Iran agreement and the ceasefire’s durability. The FTSE 100 concluded the day’s trading marginally higher, up 0.95 points at 8,758.99, reflecting the complex interplay of these geopolitical developments.