Markets reacted with relief this week to news that Donald Trump signed a draft peace deal with Iran, promising to reopen flows of oil and gas from the Gulf. However, Friday's peace talks in Switzerland were abruptly called off, raising doubts about the truce. For now, markets appear convinced that commercial vessel traffic through the Strait of Hormuz can start returning to normal.
The international oil price has slumped to below $80 a barrel, from highs above $126 during the crisis when Iran's de facto blockade on the vital waterway disrupted global energy markets. Europe's gas prices have also fallen, from over €61 per megawatt-hour in the first month of the war to between €40 and €42/MWh this week.
For UK households, lower oil and gas prices could reduce petrol costs, heating bills, and electricity prices. Food prices, which surged due to higher transport and production costs, may also ease. Mortgage rates, influenced by inflation expectations, could benefit from reduced energy costs. However, the fragile nature of the peace deal means these gains are not guaranteed.
