Dubai: Oil prices tumbled by nearly 5% on Tuesday following Israel's agreement to a ceasefire with Iran, ending nearly two weeks of escalating conflict between the two nations.
According to BBC, Brent crude, the international benchmark for oil prices, initially plummeted to $68 a barrel. However, prices began to recover as tensions persisted, with both Iran and Israel accusing each other of violating the ceasefire shortly after it was established.
The recent tensions had led to fears about potential disruptions in global oil supplies, particularly concerns regarding Tehran's ability to blockade the Strait of Hormuz, a critical channel for oil and gas shipping. This anxiety had caused oil prices to spike in recent days. Currently, crude is trading at $69.67, just below the price point when Israel initially launched missile strikes against Iran's nuclear facilities on June 13.
Market analyst Priyanka Sachdeva from Phillip Nova remarked, "If the ceasefire is followed as announced, investors might expect the return to normalcy in oil." However, she cautioned that adherence to the ceasefire terms by both Israel and Iran would significantly influence future oil price stability.
Despite the initial drop, oil prices showed signs of recovery after Israel accused Iran of breaching the ceasefire with a missile strike. This geopolitical tension resulted in stock markets in the US opening higher, with the S&P 500 and the Dow Jones Industrial Average each gaining nearly 0.9%, and the Nasdaq climbing by more than 1%.
European markets also responded positively, with the UK's FTSE 100 index up by 0.4% and Germany's Dax increasing by 1.7%. In Asia, Japan's Nikkei index closed with a 1.1% gain.
The conflict in the Middle East had previously driven up global energy prices, raising concerns about potential surges in energy bills and fuel costs worldwide. However, wholesale gas prices in the UK fell by 12.5% on Tuesday after experiencing spikes due to the conflict. Qatar, a major supplier of liquefied natural gas, plays a crucial role in this dynamic as its supplies pass through the Strait of Hormuz.
On the previous day, Iran retaliated against American strikes on its nuclear sites by launching missiles at a US military base in Qatar. The recent increase in oil prices had sparked fears of rising costs for essentials and travel globally, reminiscent of the economic repercussions following Russia's invasion of Ukraine three years ago.