The price of oil has plunged more than 9% to $87.59 a barrel, marking a sharp reversal from last week’s $100 high, as the US and Iran both halted attacks for a second night in a row. The US ambassador to the UN said the pause was intended to give “talks some space”, while an Iranian army spokesperson confirmed Tehran had stopped “retaliatory” attacks in the region.
The dramatic fall comes after weeks of volatility triggered by the outbreak of war between the US and Iran, which effectively closed the Strait of Hormuz — a shipping lane that normally carries about 20% of the world’s oil and liquefied natural gas. A ceasefire in June had brought the price back to around $70, but its collapse earlier this month reignited fears over global energy supplies and sent oil spiking above $100 last week for the first time since May.
“Oil crashes over 9% to $87.59 as US and Iran halt attacks to allow talks, raising hopes of de-escalation.”
Further disruption came from Houthi militia in Yemen, who attacked oil tankers in the Red Sea, threatening a key export route Saudi Arabia had used to bypass the Strait of Hormuz. Despite the latest drop, Susannah Streeter, chief investment strategist at Wealth Club, warned that markets were remaining “cautious given the twists and turns during this conflict”. “There is still significant uncertainty baked into these prices and a reticence about whether negotiations will lead to a lasting breakthrough,” she added.
The crisis has also pushed up wholesale gas prices. Analysis from research group Wood Mackenzie published last week showed European gas storage at a historic low, with supply security for this winter “at risk”. If the Strait of Hormuz remains closed for another two months, storage will end up below 70% by 1 November, compared with a five-year average of 90%. “Low European inventories, strong Asian demand and limited new LNG supply growth almost guarantee elevated prices through this winter and into 2027,” said Massimo Di Odoardo, vice president of gas and LNG research at Wood Mackenzie.
Higher fuel costs are already feeding through to petrol and diesel prices, with knock-on effects on food and other goods, pushing up inflation. That raises the prospect of central banks raising interest rates — as the European Central Bank did in June. Whether the current pause holds may determine whether the cycle of rising prices and rates can be broken.