Oil Slides to Two-Week Low as Iran Talks Show Signs of Progress

On Monday, the price of Brent crude, the international benchmark, fell by more than 6.5% to as low as $105.55 a barrel. That was its lowest level since 16 October, a little over two weeks earlier. The drop came as signs mounted that the eight-month war between Iran and the United States might be moving toward negotiation.

The trigger was word from Tehran that contacts with Washington were continuing. Iran's foreign minister, Abbas Araghchi, told the state media outlet IRNA that consultations through mediators were very intensive. He said Iran had presented its conditions and proposals, and that everything now depended on what he called the political rationality of Washington.

Over the weekend, officials from Qatar had tried to negotiate the release of more than $6bn (£4.5bn) in Iranian assets. The idea was that Tehran might, in return, allow the strait of Hormuz to reopen. On Monday, US vice-president JD Vance said there had been a number of good conversations with the Iranians and that he felt good about the prospects of a negotiated settlement. Last week he sent a letter to Iran's security chief, Mohsen Rezaei, though the White House has offered few details about what it says.

The tone from the president was far harder. At a campaign rally in Iowa on Sunday, in the run-up to the US midterm elections, Donald Trump said the only reason he was not finished with Iran was that he wanted to be nice and try to save lives. But at some point, he said, the US would have to give Iran "the hammer".

Investors appeared to weigh the diplomacy more heavily. Markets were also encouraged by reports that Iran's supreme leader, Mojtaba Khamenei, had granted "powers" to his government in its talks with the US aimed at ending the war.

The effects spread quickly beyond the oil market. Shares in IAG, the parent company of British Airways, rose 4.2% in London, while United Airlines jumped 7% in New York. Government borrowing costs fell too: the yield on 10-year UK bonds dropped by 10 basis points, or 0.1 of a percentage point, to its lowest since 22 September. The moves fed hopes of some relief from the inflationary pressures gripping the global economy.

Chris Beauchamp, chief market analyst at the trading platform IG, called the news manna from heaven for stock markets, which he said had felt increasingly pressured by oil's rise. He added a warning, though: there remained a risk that Trump would try one last throw of the iron dice after the midterms.

That caveat frames what comes next. The oil price has fallen on talk, not on a deal, and the Hormuz question and the Qatari asset negotiations remain unresolved. The midterms are the date to watch.