Oil price falls back on Israel-Iran ceasefire
The cost of Brent oil fell by 4% in morning trading on Tuesday, settling at around 69 US dollars a barrel, having jumped to a five-month high on Monday.
London's FTSE 100 Index also rebounded higher, up 40.5 points or 0.5% to 8798.5 in early trade following overnight gains in Asia, with Japan's Nikkei 225 up 1.1% and the Hang Seng in China ahead 0.7%.
Investors were breathing a sigh of relief after US President Donald Trump announced a ceasefire had been brokered between Israel and Iran.
The pound also rose, up 0.4% at 1.36 US dollars and 0.3% higher at 1.17 euros after both Iran and Israel confirmed they had agreed to stop fighting.
Brent crude had shot up in price in recent days on the escalating conflict, with worries that Iran might seek to block oil being shipped through the all-important Strait of Hormuz.
Panmure Liberum experts estimated that Brent crude could peak at 100 dollars (£74.43) a barrel thanks to severe disruption of the crucial waterway route, which they warned would send inflation soaring and hit stock markets hard.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: 'Despite the turmoil over the weekend, oil prices were quick to shift into reverse – an early signal that markets were betting on de-escalation sooner rather than later.
'Iran's response notably refrained from targeting any oil facilities or the important Strait of Hormuz, and the jump in prices over the past few days has mostly been erased now, positive news for the US administration and investors alike.
'Lower oil prices are a key component to keep inflation down and something the US Fed will have one eye on when thinking about whether to cut interest rates at the next meeting in July.'
Among stocks in London, blue chip oil giants BP and Shell saw recent gains reversed on the crude price fall, down 5% and 4% respectively, which held back gains on the wider FTSE 100.
Defence stocks were also lower, with aerospace group BAE Systems off 2%.
But Kathleen Brooks, research director at XTB cautioned it was 'still a very fluid situation'.
She said: 'Brent crude had rallied nearly 20% in the past month as a war premium was attached to the price of oil, which is now being unwound.
'However, if there are more signs that the ceasefire is not holding, we could see the oil price resume its uptrend.'
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