Oil prices fall more than 4% on Monday

Oil prices fell more than 4 per cent on Monday to their lowest levels since March after US President Donald Trump and Iran’s deputy foreign minister said they had reached an initial agreement to end the war and restore traffic through the Strait of Hormuz.

Brent crude dropped $4.08, or 4.7 per cent, to $83.25 a barrel, while US West Texas Intermediate fell $4.35, or 5.1 per cent, to $80.53. Both benchmarks extended losses after declining more than 3 per cent on Friday.

Pakistan’s prime minister, whose country mediated the talks, said the United States and Iran would sign a memorandum of understanding in Switzerland on Friday. Trump said the Strait of Hormuz would reopen without restrictions and that a US naval blockade of Iranian ports would end. Iran’s Mehr news agency reported that the draft agreement envisages reopening the waterway within 30 days.

Analysts said markets were rapidly unwinding the geopolitical risk premium that had supported prices during the conflict, which disrupted millions of barrels of oil and gas supplies and closed a route that handles around a fifth of global oil and liquefied natural gas trade.

Investors are now focused on the pace at which Middle Eastern producers can restore output and exports, as well as the extent of damage to energy infrastructure. Iran’s deputy foreign minister Kazem Gharibabadi said broader negotiations would continue during a 60 day ceasefire period, while Britain, France, Germany and Italy signalled they could ease sanctions on Iran in exchange for progress on its nuclear programme.