Oil prices on Tuesday dropped by 3.5% after Israel said it had agreed to US President Donald Trump’s proposal for a bilateral ceasefire with Iran.
On Tuesday, Brent was down 3.5 percent at $69.00 per barrel, while the main US crude contract WTI was 3.5 percent lower at $66.10 per barrel.
According to Lee Hardman, a senior analyst at MUFG, a potential end to the conflict has been welcomed by market participants. 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 7% when Iran said it had launched missiles at a major US base in Qatar, with oilfield assets unaffected.