Oil prices fell sharply on Monday as investors responded to renewed hopes of a breakthrough in talks aimed at ending the war between Iran and the US. Brent crude, the international benchmark, dropped by more than 6.5% to $105.55 a barrel, its lowest level since 16 October.
The decline followed confirmation from Tehran that contacts with Washington were continuing through mediators. Iranian foreign minister Abbas Araghchi said the consultations were “very intensive” and that Iran had presented its conditions and proposals, with the outcome depending on Washington’s political judgment, according to state media outlet IRNA.
Qatari officials also attempted over the weekend to negotiate the release of more than $6bn in Iranian assets. The proposal was linked to the possibility of Tehran allowing the Strait of Hormuz to reopen.
The market response contrasted with comments made by Donald Trump at a campaign rally in Iowa on Sunday. Trump warned that Iran would receive “the hammer” if progress was not made, while saying he wanted to avoid further loss of life.
Investors were encouraged on Monday by reports that Iran’s supreme leader, Mojtaba Khamenei, had given the government powers in negotiations with the US. Chris Beauchamp, chief market analyst at IG, said the development was highly positive for stock markets, although he warned that the talks could still face difficulties after the US midterm elections.
Lower oil prices raised hopes that pressure from global inflation could ease. UK government borrowing costs also fell, with the yield on 10-year government bonds declining by 10 basis points to its lowest level since 22 September.
Airline stocks gained as fuel costs eased. Shares in IAG, the parent company of British Airways, rose 4.2% in London, while United Airlines increased 7% in New York.
Sources: The Guardian Business.