Oil prices have dropped to a fresh two-month low as investor optimism over signs of diplomacy between the US and Iran fuelled the sell-off. Brent crude sank by more than 4% to below 93 US dollars a barrel during Monday afternoon, marking its lowest price since early September. It later edged back up to around 94 dollars a barrel.
The decline comes after the commodity tumbled from highs of more than 115 dollars a barrel late last month, as investors welcomed signs of diplomatic efforts between the US and Iran.
Trump's Comments on Iran
US President Donald Trump recognised last week that the Iran war played a part in his Republican Party's defeat in the midterm elections but said it was something he had to do. Over the weekend, the president dialled down his previous tone towards the conflict and said he was "highly unlikely" to order new strikes in Iran should talks progress, including around the reopening of the Strait of Hormuz.
Oil prices have spiked since the start of the war in late February because of concerns about supply constraints in the Middle East, and have remained significantly above their pre-conflict levels.
Market Reactions
Susannah Streeter, chief investment strategist for Wealth Club, said: "Investors are assessing signs of progress in Middle East peace negotiations after Trump's latest comments suggesting fresh attacks on Iran are highly unlikely, while talks continue." She said "hopes of a more conciliatory approach help take some of the heat out of oil markets".
Chris Beauchamp, chief market analyst for IG, said: "Two-month lows in oil have done much to bolster bruised sentiment in global markets, and the admittedly small signs of progress in peace talks adds to downward move." He added: "Each passing day adds to the view that no resumption of the war is likely, but one more US carrier is yet to arrive in-region, adding a hefty dose of uncertainty."
