Crude Plunges to $89.66 as Trump Declares Iran War 'Effectively Over'

Brent crude fell nearly 3% to $89.66 on Tuesday, marking its lowest level since August 31. This drop extended a sharp decline that had already seen prices fall by almost 6% on Monday. The market shift followed remarks by US President Donald Trump, who stated the war on Iran was "effectively over." His comments at a White House press conference reduced investor concerns about further military action. Trump noted that Israel and Gulf allies were well protected against Iran and that escalation was unnecessary. He added that the US remained ready to act if required, though he played down the immediate need for such measures.

European stock markets responded positively to the reduced geopolitical tension. The benchmark Stoxx 600 index rose 0.9% to 662.54, approaching the record level set in early August. Airlines, which face high fuel costs, saw notable gains as investors anticipated cheaper energy. Lufthansa shares climbed 1.8%, while Air France-KLM increased by 1.2%. In London, the FTSE 100 added 45 points to reach 10,828. Energy companies moved in the opposite direction as crude prices weakened. BP and Shell were the index's largest decliners, losing 1.7% and 1.5% respectively.

Daniela Hathorn, a senior market analyst at Capital.com, noted that the global recovery followed a strong Wall Street session. She observed that gains spread relatively widely across the market, supported by falling oil prices and renewed interest in technology stocks. However, Hathorn cautioned that an improved geopolitical outlook had not resolved underlying economic and corporate risks. Investors are now focused on October US inflation figures, scheduled for release at 1.30pm GMT. Hathorn said cheaper energy could reduce inflation expectations, but the Federal Reserve would need evidence of broader easing in price pressures before reconsidering policy. Persistent inflation and resilient growth could keep borrowing costs high for longer, while a surprise in the data could renew volatility in technology shares sensitive to yields.

The decline in wholesale oil prices also raised hopes of further savings for motorists. The AA reported on Monday that average UK petrol prices had fallen by 5p a litre since early October to 169.7p. The organization stated that current wholesale market prices point to a further reduction of 10p a litre.