Global oil markets fell sharply on Monday, with prices dropping more than 14 per cent after President Donald Trump announced a delay to planned military action against Iranian energy infrastructure.
Brent crude fell from above $114 per barrel earlier in the session to $96, while West Texas Intermediate dropped to $84.37.
The decline followed comments from Mr Trump that the United States and Iran had held “very good and productive conversations regarding a complete and total resolution of our hostilities in the Middle East” over the previous 48 hours.
Mr Trump said he had ordered a pause on “any and all military strikes against Iranian power plants and energy infrastructure for a five-day period,” subject to continued progress in talks.
The Ftse 100 rose 0.4 per cent following the announcement.
London’s benchmark index had earlier been down 2.2 per cent after the US president issued an ultimatum to Iran over the weekend to reopen the Strait of Hormuz within 48 hours.
The shift in tone marks a change from Mr Trump’s earlier warning that he would “obliterate” Iranian power facilities if the waterway remained closed.
Despite the fall, oil prices remain around one third higher than levels seen before US and Israeli strikes on Iran on February 28.
Brent crude fell from above $114 per barrel earlier in the session to $96, while West Texas Intermediate dropped to $84.37
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GETTY/Trading Economics
It remains unclear whether Iran shares the US assessment of progress in negotiations.
The International Energy Agency said the current disruption to supply exceeds the scale of the oil crises of the 1970s.
Executive director Fatih Birol said the shocks of 1973 and 1979, which removed around 10 million barrels per day from global markets, were less severe than the present situation.
Mr Birol said: “The single most important solution to this problem is opening up the Hormuz trade.”
Donald Trump’s Truth social post outlining “positive talks” with Iran
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Donald Trump
The Strait of Hormuz carries roughly one fifth of global oil supplies and has remained effectively blocked since the start of the conflict.
The agency also said the current natural gas disruption exceeds the impact of the 2022 energy crisis following Russia’s invasion of Ukraine.
Some 44 energy facilities across nine countries have been severely damaged, according to the International Energy Agency.
Member states agreed on March 11 to release 400 million barrels from strategic reserves in an effort to stabilise markets.
Commodity prices as of 12:21pm fell dramatically
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Trading Economics
Mr Birol said: “If needed, we can put more oil in the markets, both crude oil and products. Our stock release will help to comfort the markets, but this is not the solution. It will only help to reduce the pain and the economy.”
The agency is also in discussions with countries including Canada and Mexico about increasing production and refining capacity.
Separately, the US administration lifted sanctions on Iranian oil shipments at sea on Friday.
The move allows the sale of around 140 million barrels currently held on tankers, equivalent to approximately one and a half days of global demand.