US President Donald Trump may be nearing an end to negotiations with Iran as oil prices plummet
Oil prices have tumbled to their lowest point in four months as diplomatic progress between the US and Iran calms fears of supply disruptions in the Middle East.
Brent crude dropped to $70.80 per barrel on Thursday morning, having closed the previous session at $70.67 (£52.89) following President Donald Trump's comments that negotiations in Qatar had gone well.
The American benchmark West Texas Intermediate also weakened, falling to $67.60 (£50.59) per barrel.
Both contracts have now declined for three consecutive trading days as the risk premium that had been built into prices following the US-Israeli strike on Iran continues to dissipate.
Shipping through the Strait of Hormuz, a vital chokepoint for global oil supplies, has bounced back significantly in recent days.
Vice President JD Vance stated that flows through the waterway had returned to near pre-conflict levels.
Qatari officials indicated that indirect US-Iran negotiations had achieved "positive progress" on matters connected to the memorandum of understanding that concluded the June conflict.
OCBC Group Research responded by slashing its Brent crude forecasts, now projecting $75 per barrel for both the third and fourth quarters of 2026, down from earlier estimates of $85 and $80 respectively.
The bank's strategists noted that normalised shipping flows had "revived the oversupply narrative."
Susannah Streeter, chief investment strategist at Wealth Club, said: "Fears of a long-lasting global energy crunch induced by the Iran conflict are slinking away, with oil prices sinking back towards pre-crisis levels."
She observed that the stranglehold on the Strait of Hormuz had been released, with tanker traffic moving more freely and supply anxieties fading.
While clearing the backlog and fully meeting demand remains some way off, oil-producing nations are increasing output and infrastructure repairs continue, she noted.
Ms Streeter pointed to energy efficiency measures implemented during the crisis, combined with concerns about weakening global growth, as factors contributing to the bearish sentiment surrounding the sector.
Yet as oil market anxieties recede, Europe finds itself grappling with a different energy crisis. A punishing heatwave sweeping the continent has pushed peak evening wholesale electricity prices to multi-year highs across several European markets this week.
Demand for cooling has surged as offices, public buildings and households switch on air conditioning units and fans to cope with the extreme temperatures.