Oil Price Drop Fails to Lift Stocks Amid Ongoing Middle East Tensions

Stock markets across Europe and the US traded lower on Tuesday despite oil prices retreating from recent highs. This unexpected move came as investors weighed the prospects for increased tanker traffic through the Strait of Hormuz.

The hopes for easing Middle East tensions were dashed over the weekend when US President Donald Trump rejected Iran's offer for a seven-day truce, sending oil prices sharply higher on Monday.

However, after Trump said he expects talks with Iran to continue and reports that considerable volumes are continuing to flow from the region, oil prices reversed course. Axel Rudolph, an IG analyst, noted that crude oil's slide to $91 a barrel reflects growing hopes that Middle East tensions can ease, while the restoration of Saudi pipeline flows is helping offset disruption through the Strait of Hormuz.

The benchmark US crude contract WTI was trading around $91 per barrel on Tuesday, while its international equivalent, Brent crude, was above $104 per barrel. Patrick O'Hare from Briefing.com said oil prices were also reacting favorably to a report that oil exports out of the Middle East hit a post-war high.

The Wall Street main indices were lower in late morning trading, with sentiment hit by data showing US consumer confidence plunged sharply in September to a level not seen since 2014. In Europe, London and Paris both finished in the red, but Frankfurt ended the day with a small gain.