• Analysis
Oil Price Falls and Airline Shares Jump as Iran War Talks Continue
An oil price falls on Monday lifted airline shares and cut government borrowing costs, after Tehran said contacts with Washington to end the eight-month Iran war were continuing. Brent crude dropped more than 6.5% to $105.55 a barrel, its lowest since 16 October.
Brent crude slides to a two-week low
Brent crude, the international benchmark, dropped more than 6.5% on Monday to as low as $105.55 a barrel, the weakest level since 16 October. The fall brought the oil price to its lowest point in more than two weeks, with investors pricing in hopes of a breakthrough to end the Iran war.
Airline shares and bond yields react
The decline spread quickly through equity and debt markets, sending shares in airline companies higher and pushing down government borrowing costs.
- •IAG, British Airways' parent company, rose 4.2% in London.
- •United Airlines jumped 7% in New York.
- •The yield on 10-year UK bonds fell 10 basis points, or 0.1 of a percentage point, to its lowest since 22 September.
For equity investors, the relief was broad. Chris Beauchamp, chief market analyst at IG, said: "The news is manna from heaven for stock markets, which have felt increasingly pressured by oil's rise".
What moved the price
Oil prices fell after Tehran said contacts between Iran and the US to end their eight-month war were continuing. Investors were also cheered by Monday reports that Iran's supreme leader, Mojtaba Khamenei, had granted "powers" to his government in its talks with the US seeking to end the Middle East war.
Iranian foreign minister Abbas Araghchi said, according to state outlet IRNA: "Consultations through mediators are very intensive. We have presented our conditions and proposals and everything depends on the political rationality of Washington".
Qatar's weekend push and Trump's warning
Over the weekend, Qatari officials tried to negotiate the release of more than $6bn (£4.5bn) in Iranian assets, so that Tehran might allow the strait of Hormuz to reopen.
Donald Trump, speaking at a campaign rally before the US midterm elections, told voters in Iowa on Sunday that Iran would receive "the hammer" unless there was progress. He said the only reason he was not finished with Iran was that he wanted to be nice and try to save lives.
Attention now turns to whether a breakthrough follows the midterms, with Beauchamp cautioning that Trump could still make a last attempt after the vote.
