Oil prices have fallen back sharply after US President Donald Trump announced a peace deal with Iran that could see the crucial Strait of Hormuz shipping route reopened.
Benchmark Brent crude dropped more than 4% on Monday to just over 83 US dollars a barrel at one stage, marking its lowest level for more than three months.
Stock markets in Asia also surged higher overnight, with the Nikkei up 5% in Japan.
The deal came as Trump celebrated his 80th birthday at a sports event at the White House, with the US-Iran agreement set to be signed on Friday.
But many of the details of the deal are yet to be agreed and experts fear it will take some time for the Strait of Hormuz – through which a fifth of the world’s oil and gas supplies are normally shipped – to be fully reopened.
A lot of oil infrastructure has also been damaged in the conflict, which will need to be repaired and rebuilt.
The strait has effectively been closed since the US and Israel began their war on Iran on February 28th.
Its blockade has sent the cost of crude rocketing – to as much as 120 dollars a barrel at one stage – with wholesale energy costs also sent racing higher leading to fears over soaring inflation in the UK and worldwide.
Susannah Streeter, chief investment strategist at the Wealth Club, said: “With energy prices falling back, inflationary pressures should start to ease off.
“However, prices are still elevated, with crude some 16% higher compared to just before the war broke out and gas prices still more than 30% higher.
“It’s partly because some nervousness remains given that we’ve had plenty of false starts to this peace process.
“It also reflects the expected slower start to the resumption of energy flows, given the damage wreaked to facilities across the Gulf region which will take many months to repair.”