Oil price falls as US and Iran agree ceasefire – Daily Business

Petrol prices are likely to fall following the agreement

Markets rallied strongly overnight after Donald Trump and Iran agreed on a two-week ceasefire, described by the US President as a “big day for world peace”.

In a textbook negotiation, both sides claimed victory, prompting the oil price to fall and equities to make strong gains, but with conditions on each side that could see the resumption of hostilities.

However, an easing of supplies could see the UK government harden its resistance to more North Sea oil drilling.

Brent crude was trading at $95.66 a barrel, well off recent peaks, though still higher than the $70 before the conflict began at the end of February.

Stock indexes in the Asia-Pacific region rose this morning. Japan’s Nikkei 225 gained by 5% while South Korea’s Kospi jumped by nearly 6%. Hong Kong’s Hang Seng was up by 2.8%, while US stock market futures also pointed to a higher open for Wall Street and London equities are also expected to open higher.

Iran said it had agreed to reopen the Strait of Hormuz after Mr Trump accepted its 10-point plan as the basis for further talks which will begin on Friday, overseen by Pakistan.

Mr Trump said there was no question that the US had won a “total and complete victory”. This morning he posted on Truth Social to say it is a “big day for World Peace! Iran wants it to happen, they’ve had enough! Likewise, so has everyone else!”

He said the US will be “helping with the traffic buildup in the Strait of Hormuz” and promised investment in the region.

“There will be lots of positive action! Big money will be made. Iran can start the reconstruction process. We’ll be loading up with supplies of all kinds, and just “hangin’ around” in order to make sure that everything goes well. I feel confident that it will. Just like we are experiencing in the US, this could be the Golden Age of the Middle East!”

In an interview with Agence France Presse after his announcement, he said that Iran’s enriched uranium would be “perfectly taken care of” under the deal. “Or I wouldn’t have settled,” TMr rump said, suggesting that China had been influential in securing the agreement. Asked about the risk of conflict flaring up again, he replied: “You’re going to have to see.”

Israel said it supports Mr Trump’s decision to suspend strikes against Iran for two weeks “subject to Iran immediately opening the straits and stopping all attacks on the US, Israel and countries in the region.” However, Lebanon is not included in the deal, despite Pakistan and Iran saying it did.

Before the announcement of a ceasefire, there was increased pressure on the UK government to allow more drilling in the North Sea and to scrap the energy profits levy.

Chancellor Rachel Reeves had been minded to lift the levy in the Spring Statement but was deterred from doing so because of the tension in the Middle East.

Her continued resistance to support more activity in the North has led industry sources to accuse her of blocking £17.5 billion of investment which would reduce the UK’s reliance on oil and gas imports.

However, the ceasefire may harden the government’s reluctance to allow more production despite suggestions that even the hardline Energy Secretary Ed Miliband will allow the Jackdaw gas field to go ahead.

Labour ministers have insisted that the crisis points to greater investment in fossil fuel alternatives to meet the country’s energy needs.

Nigel Green, chief executive of global financial advisory giant deVere Group, said: “Drivers will feel some short-term relief as petrol and diesel prices edge lower, and markets are reacting strongly to the pause.

“But oil remains elevated, and that continues to feed through the entire economy, into prices, business costs and investment decisions.”

“This gives companies a bit of breathing space, but costs remain high. Many firms will hold prices where they are because margins have already been squeezed, and that means consumers continue to feel the pressure.

“Smaller firms remain especially exposed, with less flexibility to absorb rising costs. Large companies can manage some of the pressure. Smaller businesses often pass costs on or take the hit themselves, which affects pricing, hiring and investment.”

The implications for interest rates remain central. Elevated oil prices continue to influence inflation, complicating decisions for the Bank of England.

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