Oil Prices Plummet Amid Hopes for US-Israel War Ceasefire with Iran

Oil prices are on track for their biggest monthly fall since 2020, as investors hoped for an end to the US-Israel war on Iran. The price of Brent crude futures, the global benchmark, was down 1.3% on Friday at about $92 and 19% since the end of April. The optimism came after Donald Trump circulated a draft peace agreement for the war in Iran among allies. The US news site Axios reported that the US and Iran had reached a tentative deal to extend a ceasefire by 60 days, although it added that Trump had yet to agree to the terms. The US vice-president, JD Vance, said a deal was “not there yet” but “very close”. The war in Iran has lasted 90 days and caused chaos across the global economy after Iran responded by closing the strait of Hormuz to shipping. That shut off a large proportion of exports from the Gulf, one of the world’s key oil-producing regions. While the US initially aimed at regime change in Iran, its ambitions appear to have been scaled back to reopening the strait, as well as reaching a deal to prevent Iran from building a nuclear bomb. Henry Allen, of Deutsche Bank, said markets were showing “mounting optimism about an end to the conflict”. He said: “With oil prices coming down, that’s meant investors have started to price out the more stagflationary outcomes for the global economy, with a clear rally across multiple asset classes.” The phrase stagflation refers to the damaging combination of stagnation in GDP growth and inflationary price increases. Markets across Asia rallied on Friday. Japan’s Nikkei 225 rose 2.5% and South Korea’s Kospi gained 3.9%. Hong Kong’s Hang Seng index gained 0.7%, although the performance of stocks in mainland China was more muted. The Shanghai CSI 300 fell by 0.45%.