The price of Brent crude fell below $100 after the US and Iran announced a two-week ceasefire. Following the announcement, the price per barrel dropped to as low as $92, the lowest level since mid-March. The impact extended beyond energy markets, also triggering gains in global equity futures, a sharp decline in the US dollar, and a rise in the gold price, which reached a three-week high.
After tensions escalated due to the ongoing war and the resulting closure of the Strait of Hormuz by Iran, the last-minute agreement—although fragile and with terms not yet fully clear—was met with relief by financial markets. This has led markets—perhaps somewhat optimistically—to price in a realistic prospect of an end to the conflict and a return to a degree of normality in the Persian Gulf.
However, the ceasefire appears fragile, and the US government’s last-minute reversal—now willing to negotiate the terms proposed by Iran—does not yet mean that a longer-term agreement will be reached once the two-week ceasefire expires. Against this backdrop, the price per barrel has fallen significantly from recent highs, but is still 22% above the level at the start of the war. Further clarity may be needed before we see any further substantial price declines.
Ricardo Evangelista – Senior Analyst, ActivTrades
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