Oil plunges below $100: markets bet on imminent peace between Iran and the US

Oil prices fell sharply today, dropping to two-week lows during the day. They were buoyed by growing optimism that the United States and Iran are nearing a peace deal, despite continuing to disagree on key issues such as the blockade of the Strait of Hormuz, through which one-fifth of the world’s oil supplies normally flow.

At around 18:00 CEST, North Sea Brent crude was down 5.5 percent at $98.07 a barrel. At the same time, a barrel of US light crude West Texas Intermediate (WTI) was 5.3 percent lower at $91.51. At the start of trading, both benchmarks fell to their lowest levels since May 7.

However, markets in a number of countries, including the US, Hong Kong and Britain, were closed today for public holidays. Trading volumes are therefore significantly lower than on a typical day.

US President Donald Trump said on Saturday that Washington and Iran had “largely” reached an understanding on a peace deal that would reopen the key strait.

Analysts nevertheless expect it to take months for oil flows through the strait to return to normal. Damaged oil and gas facilities will first have to be repaired.

“Despite all the reservations and risks that remain around a peace deal and the Strait of Hormuz, a light is now appearing at the end of the tunnel, which will bring some relief to oil prices in the near future,” said MST Marquee analyst Saul Kavonic.

“Although it’s not done yet, there seems to be some hope that oil will start flowing through the Strait of Hormuz again,” said Phil Flynn, an analyst at Price Futures Group.

US Secretary of State Marco Rubio said today, regarding the ongoing negotiations to resolve the armed conflict with Iran, that the process would either result in a favourable deal or Washington would deal with Tehran “in a different way”.

Iran and the United States have made significant progress on many issues related to a lasting end to the war, according to Iranian Foreign Ministry spokesperson Esmaeil Baghaei, although this does not mean a peace deal will be signed soon.

Oil prices in dollars per barrel (about 159 litres)