Key Moments
- Benchmark Brent crude has fallen roughly 14% to $94 a barrel after news of a two-week ceasefire involving the US, Israel and Iran.
- UK wholesale gas prices have dropped more than 18% to 110 pence per unit, although they remain well above pre-war levels of 78 pence.
- Stock markets in the UK and major Asian economies have surged, with South Korea’s Kospi up nearly 7% and Japan’s Nikkei rising 5.5%.
Oil and Gas Reprice on Ceasefire and Shipping Reopening
Oil prices have fallen sharply while global equity markets have rallied following the announcement of a two-week ceasefire between the US, Israel and Iran.
Benchmark Brent crude has dropped about 14%, sliding below the $100 threshold to trade at $94 per barrel. The move marks the lowest level seen since the early phase of the conflict, although prices remain elevated compared with pre-war levels of around $72.
Current prices are also significantly above the $69 per barrel level recorded in 2025, indicating that market participants still see considerable risk around future supply.
UK wholesale gas prices have also recorded a steep decline, falling more than 18% to levels last seen on 2 March. At 110 pence per unit, however, prices remain substantially higher than the pre-war level of 78 pence.
The easing in gas markets is closely tied to news from Iran that the strategically important Strait of Hormuz – a key route for oil and gas shipments – has been reopened.
Key Energy Price Levels
| Commodity / Rate | Current Level | Pre-war Level | Other Reference Level |
|---|---|---|---|
| Brent crude oil | $94 per barrel | around $72 per barrel | $69 per barrel (2025) |
| UK wholesale gas | 110 pence per unit | 78 pence per unit | Low last seen on 2 March |
Supply Chain Restart May Limit Further Price Declines
Despite the initial market relief, the broader energy supply system faces a complex restart. Producers that reduced or halted operations during the conflict now need time to restore output to pre-war levels. This includes restarting powered-down oil and gas fields and normalizing upstream activity.
Refineries, which have been starved of crude feedstock to process into products such as aviation fuel, will also require time to receive new supplies, ramp up operations, and dispatch refined products. These logistical and operational lags are expected to slow any further rapid normalization in prices.
Persistent supply constraints are likely to keep input costs elevated for some sectors. Farmers may continue to face higher fertilizer prices, and retail fuel costs for petrol and diesel are expected to remain elevated for at least several weeks. Such pressures could act as a floor under oil and gas prices, preventing a more dramatic collapse.
Implications for the UK Economy and Interest Rate Expectations
Higher fossil fuel prices feed directly into broader price pressures across the UK economy. While inflation had been expected to rise, the latest market moves are prompting traders to reassess the scale and timing of that increase and its impact on monetary policy.
At points in March, market participants had anticipated three interest rate hikes by 2026, which would have taken the base rate to 4.5%. Now only one increase is reflected in pricing, expected in September, which would lift the base borrowing rate back to 4%.
Before the conflict, markets broadly expected a sequence of rate cuts rather than hikes, underscoring how the war and energy shock have reshaped the policy outlook.
Sterling and Cross-Currency Moves
The British pound has strengthened against the US dollar, buying $1.34 for the first time in two weeks, compared with $1.32 yesterday. In contrast, the pound has seen little movement against the euro and continues to trade at €1.14.
Equity Markets Stage Powerful Rally
Global equity benchmarks are responding positively to the ceasefire and the pullback in energy prices.
In the UK, the FTSE 100 index – comprising the most valuable companies listed on the London Stock Exchange – has climbed more than 2.3%, marking a substantial one-day advance.
Major Asian indices have posted even stronger gains. South Korea’s main stock benchmark, the Kospi, is up nearly 7%, while Japan’s Nikkei has surged 5.5%. Both markets had been heavily exposed to disruptions in Middle Eastern energy supplies and had previously experienced panic-driven buying amid fears of shortages.
The strong rebound across these indices reflects relief that some of the most acute supply risks have eased, at least for the duration of the two-week ceasefire.
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