Oil prices have fallen after the United States and Iran made progress in diplomatic talks aimed at reducing tensions in the Middle East, helping calm fears over energy supplies and global inflation.
Brent crude and US benchmark West Texas Intermediate both declined on Monday after mediators said Washington and Tehran had agreed on a roadmap towards a final agreement within 60 days.
The talks, held in Switzerland, were led by US Vice President JD Vance and Iran’s parliamentary speaker Mohammad Bagher Ghalibaf. The meeting had initially been delayed because of fighting involving Israel and Hezbollah.
Pakistan and Qatar, acting as mediators, described the discussions as taking place in a “positive and constructive atmosphere”.
The diplomatic breakthrough has reassured investors after weeks of uncertainty in the Middle East, where conflict had threatened oil supplies and raised fears of further inflationary pressures around the world.
The two mediating countries said both sides had agreed to establish a direct communication channel to avoid incidents in the Strait of Hormuz, a strategic waterway through which roughly one-fifth of the world’s oil and gas supplies pass.
In a joint statement, the mediators said: “The High Level Committee has agreed upon a roadmap towards reaching a final deal within 60 days, laying the foundation for the immediate commencement of further technical talks.”
Iranian Foreign Minister Abbas Araghchi welcomed the developments, writing on social media that “mediation has delivered major progress to end the Lebanon war”.
The optimism pushed oil prices lower during Asian trading.
Brent crude fell by 1.7% to $79.19 a barrel, while West Texas Intermediate dropped 0.6% to $75.37.
Stock markets delivered mixed performances despite the easing tensions. Tokyo, Seoul, Shanghai and Mumbai recorded gains, helped by technology stocks, while Hong Kong, Sydney, Singapore and Jakarta closed lower.
European markets opened slightly higher, reflecting cautious optimism among investors.
Skye Masters, an analyst at National Australia Bank, warned that markets remained vulnerable to further developments in the region.
“Following the positive response last week to reports of a US-Iran ceasefire, markets are likely to open with a cautious tone to start the new week as it remains clear that the situation in the Middle East remains fragile,” she said.
“The dollar is likely to remain supported, the oil price could swing either way, but at current levels the risk is for a lift higher.”
Meanwhile, political uncertainty in Britain also weighed on currency markets.
Sterling extended recent losses following growing speculation that Prime Minister Keir Starmer could step down amid pressure from Labour MPs after a strong by-election performance by Andy Burnham.
Investors fear that any new leadership could introduce additional spending measures that would increase the UK’s already substantial debt burden.
Analysts say financial markets will continue to monitor both Middle East diplomacy and political developments in Britain, with investors remaining sensitive to any signs of renewed instability.
