Oil Prices Plummet as Iran-US Diplomacy Hopes Rise
European government bonds rebounded on Monday as investors grew hopeful about diplomatic progress between Iran and the US. The optimism was sparked by signals from US officials that talks with Iran remain possible, following a report of President Donald Trump's willingness to meet Iranian President Masoud Pezeshkian at the UN General Assembly in New York.
Brent crude oil prices dropped 2.1% to $101.19 a barrel, while West Texas Intermediate fell 1.9% to below $98 a barrel. The decline in oil prices provided relief to debt markets, which had been pressured by higher energy prices and French fiscal concerns last week.
The yields on France's 10-year bond fell 0.11 percentage points to 4.47%, while Italy's 10-year yield declined 0.09 percentage points to 4.35%. UK gilts also gained ground, with 10-year yields down 0.06 percentage points to 5.24%.
Van Luu, global head of solutions strategy at Russell Investments, attributed the drop in oil prices to the US position that negotiations remain possible. Mohit Kumar at Jefferies noted that local tensions in the Middle East have passed their peak and markets should see movement towards normalization in the coming weeks.