Oil prices tumble after Israel agrees to Iran ceasefire

Oil prices tumbled by nearly 5% on Tuesday after Israel agreed to a ceasefire with Iran after nearly two weeks of conflict.

Brent crude, the international benchmark for oil prices, fell to $68 a barrel, which is below the level it was at when Israel launched missiles against Iran’s nuclear sites on 13 June.

Prices had spiked in recent days as concerns grew that Iran could disrupt global supplies by blockading the Strait of Hormuz, a key shipping route for oil and gas.

Stock markets in the UK, Europe and Asia rose as US President Donald Trump declared the ceasefire “is now in effect”, after which Israel confirmed that it had agreed to the move.

Oil prices have soared to as much as $81 a barrel since the missile strikes began, stoking fears that the cost of living could increase as petrol, diesel and business expenses grew.

“If the ceasefire is followed as announced, investors might expect the return to normalcy in oil,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.

But she added that “the extent to which Israel and Iran adhere to the recently announced ceasefire conditions will play a significant role in determining oil prices”.

The fall in prices narrowed as Israel claimed that Iran had violated the ceasefire after accusing Tehran of launching a missile strike.

The FTSE 100 index in the UK rose by 0.4% in early trading, while the CAC-40 in France increased by 1.4% and Germany’s Dax added 2%.

In Asia, Japan’s Nikkei share index ended the day up 1.1% and Hong Kong’s Hang Seng increased by 2.1%.

Trump urged Israel and Iran not to “violate” the ceasefire. Israel said it had agreed to it after “eliminating the Iranian nuclear threat”.

The Middle East conflict had pushed global energy prices higher, which if sustained would have a knock-on effect on energy bills and petrol prices.

Wholesale UK gas prices dropped by 12.5% on Tuesday after spiking higher. Qatar is a major supplier of liquefied natural gas, which is transported through the Strait of Hormuz.

On Monday, Iran had launched missiles at a US military base in Qatar in retaliation for American strikes against Iran’s nuclear sites.

The recent rises in oil prices had led to fears that increased energy costs could make everything – from petrol and food to holidays – more expensive around the world, including in the UK.

That is what happened after Russia invaded Ukraine three years ago, affecting people’s lives around the globe.