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Oil prices tumbled on Tuesday after US President Donald Trump said that Iran and Israel had agreed to a ceasefire, allaying fears that the conflict would restrict global crude supply.
Brent crude, the international oil benchmark, fell as much as 5.6 per cent to $67.50, before falling back to trade down 3.7 per cent at $68.85 in London.
Israel said on Tuesday that it had agreed to a US-brokered ceasefire with Iran, heralding a possible end to almost two weeks of conflict between the regional rivals.
Oil prices had already fallen sharply on Monday following Iran’s attack on a US military base in Qatar, which markets judged to be a “de-escalatory” gesture that would stave off a more serious assault on energy infrastructure by Tehran.
Brent closed 7.2 per cent down on Monday at $71.48 a barrel, the biggest drop since August 2022.
The moves marked a sharp turnaround from the open on Monday, when Brent surged above $80 as traders responded to US strikes on Iran’s nuclear facilities at the weekend.
Qatar said it had repelled a missile barrage fired by Iran, which targeted the Al Udeid air base near Doha, where 10,000 US troops are stationed.
Following the attack, Helima Croft, a former CIA analyst now at RBC Capital Markets, said: “The market is now clearly pricing in major de-escalation between the US and Iran.”
Analysts said the decline also reflected traders judging that Iran would not attack important Middle Eastern energy infrastructure or attempt to close the Strait of Hormuz, the channel for about a quarter of the world’s seaborne oil trade, in response to the incursions by the US and Israel.
“Oil markets have come to realise with a jolt that Iran has no interest in an uncontrolled conflagration. As in 2020, Tehran has calibrated a bare minimum response,” said Bill Farren-Price, at the Oxford Institute for Energy Studies.
Analysts also said the crude market was supported by plentiful supply, particularly after the Opec+ group of oil producers lifted its output targets in recent months.
“Another reason for the lack of war premium is the flood of oil that is hitting the market,” said Robert Yawger, commodity analyst at Mizuho Securities, an investment bank.