Brent crude futures dropped below $90 per barrel for the first time since August on Tuesday, extending a sharp decline in global oil prices as U.S. President Donald Trump signalled that further military action against Iran might not be necessary.
At 3:00 p.m. West Africa Time, Brent crude futures stood at $89.60 per barrel, down 3.21 percent, while U.S. West Texas Intermediate (WTI) crude traded at $84.40, representing a 2.82 percent decline.
The latest losses followed a near 6 percent drop on Monday, as markets responded to growing expectations that diplomatic efforts could bring an end to the eight-month-old conflict in the Middle East. Brent had also fallen below $92 at the start of Asian trading before slipping further during European market hours.
Trump reinforced expectations of de-escalation during a White House press briefing, saying military action against Iran did not appear necessary at the moment, although U.S. forces remained prepared to respond if circumstances changed.
“At this point, taking the military action doesn’t seem to be a very necessary thing – but we’re locked and loaded, ready to go for any reason,” he said.
The U.S. president also said Israel and Gulf allies were adequately protected against Iranian threats, reducing the immediate need for further escalation.
Investors have increasingly focused on diplomatic efforts mediated by Qatar, which could produce an agreement between Washington and Tehran. The prospect of an arrangement has strengthened market expectations that disruptions to energy shipments through the region could ease.
The decline extends last week's sell-off, when Brent crude lost approximately 17 percent, marking its steepest weekly fall since the volatile trading period during the COVID-19 pandemic in 2020. From its late-October peak above $117 per barrel, the benchmark has now shed roughly 25 percent of its value.
Ole Hansen, Head of Commodity Strategy at Saxo Bank, attributed the decline to improving prospects for an end to the conflict and Trump's comments suggesting that additional strikes on Iran might not be required.
Hansen noted that crude oil flows had almost returned to pre-war levels, although supplies of liquefied natural gas and refined petroleum products remained constrained. These disruptions continue to support prices, particularly for diesel.
He added that traders would closely monitor further statements from Washington and Tehran for indications of progress towards a diplomatic settlement.
Despite the improving market outlook, security risks in the region have not disappeared. Yemen's Houthi movement continued attacks on Saudi energy infrastructure, with the latest incident targeting the East-West pipeline. An official from Saudi Arabia's energy ministry said the attack caused a limited fire, which was subsequently extinguished.
The pipeline is a critical route for transporting crude from eastern Saudi Arabia to the Red Sea, allowing the kingdom to move oil without relying entirely on shipments through the Strait of Hormuz.
The decline in crude prices also supported gains across European equity markets on Tuesday. The Stoxx 600 index rose 0.9 percent to 662.54 points, approaching its record high, while London's FTSE 100 gained 45 points, or 0.4 percent, to 10,828.
Airline shares advanced on expectations that lower oil prices could reduce aviation fuel expenses. Lufthansa gained 1.8 percent, while Air France-KLM rose 1.2 percent. In contrast, energy companies BP and Shell fell 1.7 percent and 1.5 percent, respectively, as weaker crude prices weighed on their shares.
Daniela Hathorn, senior market analyst at Capital.com, said global markets were extending their recovery following a broad-based rally on Wall Street, supported by falling oil prices and renewed demand for technology stocks.
However, she cautioned that geopolitical optimism had not removed underlying economic and corporate risks. She said lower energy prices could help moderate inflation expectations, but the U.S. Federal Reserve would require broader evidence of easing price pressures before reconsidering its monetary policy.
Investors were also awaiting the release of U.S. inflation figures for October, scheduled for 1:30 p.m. GMT on Tuesday, as stronger-than-expected price growth could revive concerns about interest rates remaining elevated.
The decline in wholesale oil prices could also offer some relief to consumers if it translates into lower retail fuel costs. In the United Kingdom, the Automobile Association said average petrol prices had fallen by 5 pence per litre since early October to 169.7 pence, with wholesale market movements indicating the possibility of a further 10-pence reduction.
However, the extent to which the latest decline in international crude prices will translate into lower pump prices will depend on subsequent movements in refined-product costs, exchange rates, distribution expenses and domestic fuel pricing.
