Oil prices fall on hopes of a peace deal between the US and Iran

Oil prices are falling today in response to US President Donald Trump’s statement that the war with Iran will end “very quickly,” Reuters reports. At around 15:00 CEST, North Sea Brent crude was down about 2.5 percent, trading just below 108.5 dollars a barrel. US light crude West Texas Intermediate (WTI) was down more than two percent, falling below 102 dollars a barrel.

However, concerns persist in the market about continued disruption to oil supplies from the Persian Gulf. The conflict in the Middle East, which began in late February with US-Israeli strikes on Iran, has crippled shipping through the Strait of Hormuz. About a fifth of the world’s oil supplies normally pass through it.

On Tuesday, Trump again threatened Iran with attacks if Tehran did not agree to a deal to end the war. At the same time, he again expressed hope that further strikes would not be necessary.

“Oil prices are likely to have some room to rise even if a deal is reached, because supplies will not immediately return to pre-war levels,” said Emril Jamil, an analyst at LSEG.

Analysts at Citi forecast on Tuesday that Brent prices would climb to 120 dollars a barrel in the short term. According to Wood Mackenzie, they could approach 200 dollars a barrel if the Strait of Hormuz remained largely closed until the end of this year, Reuters reported.

Analysts at PVM warned that global oil inventories could fall to critically low levels. “But as we have seen recently, market participants are fairly relaxed about what this conflict could cause,” they added.

Oil prices in dollars per barrel (about 159 liters)