Oil prices drop 5% after Israel agrees to ceasefire

Nigeria’s crude oil production

Oil prices drop 5% after Israel agrees to ceasefire

Oil prices sank more than five percent Tuesday after Israel said it had agreed to US President Donald Trump’s proposal for a bilateral ceasefire with Iran.

Shares in Asia were buoyant, as fears of an energy market shock eased following 12 days of war between Israel and its arch-foe. London, Paris and Frankfurt also rose at the open.

At around 0650 GMT on Tuesday, Brent was down 5.2 percent at $67.75 per barrel, while the main US crude contract WTI was 5.4 percent lower at $65.01 per barrel.

“A potential end to the conflict has been welcomed by market participants,” wrote Lee Hardman at MUFG, who noted that Brent “has now almost fully reversed all of the gains since the conflict started”.

“In the FX market a similar reversal is underway with the US dollar giving back recent gains. If Middle East risks now fade into the background as a market driver, it is more likely that the US dollar weakening trend will resume.”

Crude prices had briefly spiked Monday morning on the prospect that Iran could retaliate to a weekend US attack on its nuclear facilities by throttling oil transport through the strategic Strait of Hormuz.

But they then tumbled as much as seven percent when Iran said it had launched missiles at a major US base in Qatar, with oilfield assets unaffected.

– ‘War premium’ –

“Tehran played it cool. Their ‘retaliation’ hit a US base in Qatar — loud enough for headlines, quiet enough not to shake the oil market’s foundations,” said Stephen Innes at SPI Asset Management.

“And once that became clear, the war premium came crashing out of crude.”