Oil Prices Plummet as Ceasefire Hopes Reignite

Oil prices plummeted to below $90 a barrel as hopes of a ceasefire between the US and Iran reignited. The cost of benchmark Brent crude dropped by 8% to $87.55 a barrel, marking a significant decline from its recent high of $100. This price drop comes amidst renewed efforts to negotiate a peace deal, with mediators working to get both countries back to the table.

The Strait of Hormuz, a crucial waterway for global oil and gas shipments, has been at the center of the conflict. Iran's firing at ships trying to pass through the strait sparked nearly two weeks of escalating attacks, causing oil prices to spike higher. However, with a pause in fighting for three days in a row, markets are now optimistic about a potential resolution.

Investment director Russ Mould at AJ Bell noted that if oil prices remain lower, it may give Bank of England policymakers some breathing space on the inflation front. The next interest rate decision is due on Thursday, with expectations of no change from the current 3.75%.