The cost of oil decreased by almost 5% on Tuesday following a ceasefire agreement between Israel and Iran after almost two weeks of conflict.
Brent crude, the international standard for oil prices, fell to $68 per barrel, lower than the level it was at when Israel launched missiles at Iran’s nuclear sites on June 13th.
Prices had recently risen as concerns grew over the possibility of Iran blocking the Strait of Hormuz, a crucial shipping route for oil and gas, and disrupting global supplies.
Stock markets in the UK, Europe, and Asia all rose as US President Donald Trump announced that the ceasefire was now in effect, which was then confirmed by Israel.
Since the missile strikes began, oil prices have reached as high as $81 per barrel, causing fears of an increase in living costs due to rising petrol, diesel, and business expenses.
“If the ceasefire is adhered to as announced, investors can expect a return to normalcy in the oil market,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.
However, she also noted that the extent to which Israel and Iran follow the ceasefire conditions will play a significant role in determining future oil prices.
The drop in prices was limited as Israel accused Iran of violating the ceasefire after launching a missile strike.
In early trading, the UK’s FTSE 100 index rose by 0.4%, while France’s CAC-40 increased by 1.4% and Germany’s Dax added 2%.
In Asia, Japan’s Nikkei share index ended the day up 1.1% and Hong Kong’s Hang Seng increased by 2.1%.
Trump urged both Israel and Iran to refrain from breaking the ceasefire. Israel stated that it agreed to the ceasefire after “eliminating the Iranian nuclear threat.”
The conflict in the Middle East had caused a rise in global energy prices, which could have had a domino effect on energy bills and petrol prices if sustained.
However, wholesale UK gas prices dropped by 12.5% on Tuesday after previously spiking. Qatar, a major supplier of liquefied natural gas, transports its gas through the Strait of Hormuz.
On Monday, Iran retaliated against US strikes on its nuclear sites by launching missiles at a US military base in Qatar.
The recent increase in oil prices had sparked concerns that the rising energy costs could lead to higher prices for everyday items such as petrol, food, and holidays around the world, including in the UK.
This was seen in the aftermath of Russia’s invasion of Ukraine three years ago, which had an impact on people’s lives globally.