Oil prices fall as hopes grow for an end to Iran war
Brent crude slid to its lowest level since mid-October as Tehran said contacts with Washington were continuing. Airline shares rose and government borrowing costs eased.
Key points
- Brent crude dropped more than 6.5% on Monday, reaching as low as $105.55 a barrel
- The fall was the lowest oil price since 16 October
- Iran said contacts with the US through mediators were continuing
- Qatari officials reportedly sought to free more than $6bn in Iranian assets over the weekend
- Airline shares and UK 10-year bond yields moved sharply lower
Oil prices fell sharply on Monday as hopes grew that the conflict between Iran and the United States could soon end. According to The Guardian, Brent crude, the main international oil benchmark, dropped by more than 6.5% during the day, reaching as low as $105.55 a barrel. That is the weakest level since 16 October.
The move lifted shares in airline companies and pushed down government borrowing costs. Investors reacted to signs that talks aimed at ending the eight-month war were still moving forward. Oil has been a major driver of inflationary pressure across the global economy, so any easing in its price is closely watched.
Diplomatic contacts continue
Tehran confirmed that channels between Iran and the US remain open. Iran’s foreign minister, Abbas Araghchi, said discussions through mediators were taking place at a very high tempo. He added that Iran had set out its conditions and proposals, and that the outcome rests on how sensibly Washington responds. His remarks were carried by the state media outlet IRNA, as cited by The Guardian.
Over the weekend, Qatari officials worked on a plan that could unlock over $6bn (£4.5bn) belonging to Iran. The arrangement was reportedly linked to Iran allowing the Strait of Hormuz to reopen. The reports did not say whether that plan had been agreed.
Reports on Monday also said Iran’s supreme leader, Mojtaba Khamenei, had given his government expanded powers in negotiations with Washington. The report encouraged investors, who had been unsettled by rising oil costs.
A harder message from Trump
The political tone was less settled. On Sunday, Donald Trump told voters at a campaign rally in Iowa that Iran would face a heavy response unless it showed progress. He said he preferred restraint and wanted to spare lives, but warned that stronger action would eventually follow. The rally took place in the run-up to the US midterm elections.
Such statements have added uncertainty to the diplomatic picture. Markets have therefore reacted to each new signal from both Tehran and Washington.
Market reaction and borrowing costs
Chris Beauchamp, who leads market research at IG, a trading and investment firm, called the news a welcome boost for equities, which had come under growing pressure from higher oil prices. He also cautioned that Trump could still take a tougher line after the midterms.
Lower oil prices also eased expectations that inflation would keep climbing across the world economy. The yield on 10-year UK government bonds fell by 0.1 percentage point, to its lowest level since 22 September.
Airline stocks rose strongly. IAG, the parent company of British Airways, gained 4.2% in London, while United Airlines climbed 7% in New York.
What remains unclear
Despite the rally, the situation is not resolved. Reports of progress have not been matched by a confirmed agreement. The source reports do not confirm a final deal, so markets remain sensitive to new statements from both sides.
Frequently asked questions
Why did oil prices fall on Monday?
Brent crude dropped more than 6.5% after Iran said contacts with the US to end the eight-month war were continuing through mediators. Reports that Iranu0026#039;s supreme leader had given his government more powers in talks also encouraged investors.
How did airline shares and bond yields react?
IAG, the parent company of British Airways, rose 4.2% in London, and United Airlines jumped 7% in New York. The yield on 10-year UK bonds fell by 0.1 percentage point to its lowest level since 22 September.
Sources
This article was written with the help of AI from reports by the outlets listed above. See our Editorial Policy. Spotted a mistake? Tell us.