Oil price falls but Trump and Iran clash on negotiations claim
The price of oil has drifted lower after Donald Trump called off strikes on Iran but progress towards a finalised peace deal continues to stall as the President clashes with Iran’s leadership.
Brent crude – the international benchmark for oil prices – tumbled over five per cent on Monday to below $83 per barrel as Trump claimed a peace deal was “imminent”.
The US President has said negotiations over a deal were set to take place on Monday afternoon after nations in the Middle East asked him to stop the strikes, which he claimed would have been the “biggest attack since World War Two”.
But the regime in Iran has poured cold water on hopes of talks, stating it has “no plan to receive a delegation or send an Iranian one” in the coming days.
Deutsche Bank analyst Jim Reid said the “hopes have risen over the weekend of a diplomatic off-ramp” between the US and Iran.
But Patrick Munnelly, market strategist at Tickmill Group, warned there was “still a meaningful gap between talks resuming and the Strait of Hormuz fully reopening”.
“A diplomatic process can reduce tail risk quickly, but it does not guarantee supply normalisation on the same timetable.”
Iran: No closer to fully re-opening Strait of Hormuz
Esmail Baghaei, the spokesman for Iran’s foreign ministry, said the nation is in talks with Oman to discuss a temporary safe route through the Strait of Hormuz but added a permanent solution was no closer.
He added that an agreement with Oman was not sufficient to reopen the strait and the situation would remain unchanged whilst US “aggression” continues.
It comes despite Trump claiming the two sides were on the “perimeter” of a peace deal.
Despite the uncertainty, the pause in strikes has brought relief to global markets with Europe’s top indexes climbing higher.
Germany’s Dax was up 1.3 per cent and France’s Cac 40 1.2 per cent. The FTSE 100 was inching around 0.2 per cent higher, but was held back by a six per cent plunge from Astrazeneca.
The yield on 10-year UK bonds also fell by over eight basis points to around 4.95 per cent, handing a modest reprieve to the government’s cost of borrowing.
Oil prices rose over 20 per cent in July and still remains 14 per cent higher than before conflict broke out between the US and Iran at the end of February.
Brits are also continuing to feel the pain at the pump with the RAC warning petrol prices were once again driven up by the conflict last month.
It found the average pump price has risen to 160.85p, up from 150.72p in early July, making petrol prices the most expensive since 2022, when Russia’s invasion of Ukraine triggered an energy crisis.
Simon Williams, head of policy at the RAC, said prices at the pump should begin to “stabilise” this week but diesel was set to “carry on rising”.