Oil prices have fallen to their lowest level in months as hopes grow for an end to the US-Iran conflict.
Comments from President Donald Trump prompted a further drop after a week of falling prices.
Brent crude fell below $90 a barrel on Tuesday for the first time since August. It dropped roughly three per cent during morning trading to around $89.20.
The fall followed Mr Trump’s remarks at a White House press conference on Monday evening, when he suggested the war could end soon.
Mr Trump said: “We’re seeing momentum toward the end of this conflict, I think it’s going to be ending fairly soon.”
The president also played down the prospect of further military action against Iran, saying it was not “necessary” at this stage.
However, he said the US was “locked and loaded and ready to go” if circumstances changed.
Mr Trump has also indicated that negotiations are taking place and that a peace agreement could be within reach.
Last week, he acknowledged that the Iran war contributed to the Republican Party’s loss in the midterm elections.
Despite this political cost, Mr Trump maintained it was a course of action he had been compelled to take.
Ewa Manthey and Warren Patterson, commodities strategists at ING, pointed to the recovery of Middle East oil flows as an additional factor weighing on prices.
“Crude exports from the Persian Gulf are estimated to have returned to around 80-85% of pre-war levels, including pipeline volumes, while refined product shipments have recovered to roughly 35-40%,” they said.
Ms Manthey and Mr Patterson also noted that reports of Iran potentially softening its stance on control of the Strait of Hormuz had eased fears of lasting disruption to one of the world’s most critical oil transit routes.
However, they cautioned that prices “remain sensitive to developments in the Middle East” even as tensions show signs of abating.
Falling oil prices could ease pressure on inflation and energy costs if the decline lasts, Laurence Booth, global head of markets at CMC Markets, said.
Mr Booth said: “Hopes that the conflict could be winding down have taken some of the pressure out of oil prices, but there is still plenty of uncertainty over how quickly energy flows can return to normal.”
The fall comes after the Bank of England raised interest rates to four per cent, partly in response to higher energy costs. However, any benefit would take time to feed through.
Mr Booth said: “Even with oil falling this quickly, the inflation already working its way through the economy will not disappear overnight.”
Sustained lower prices could ease expectations for further interest rate rises and reduce Government borrowing costs, while offering households and businesses some relief, he said.
He warned: “But if talks break down and oil starts moving higher again, the inflation and interest-rate debate could quickly return.”
Governor Andrew Bailey warned that even a fall in energy prices would not provide immediate relief. He said there was “already a significant amount of inflation pressure in the pipeline” for the UK economy.
Nevertheless, Mr Bailey was clear about what would offer the greatest benefit to Britain’s economic outlook.
Resolving the conflict in the Middle East, he said, was the best thing that could happen in terms of easing pressure on the economy.
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