Oil tumbles as Trump says Iran war is in its 'final stages'

 Oil prices tumbled and global stock markets rallied after Donald Trump said the war in Iran was in its “final stages” and oil shipments began to move again through the Strait of Hormuz.

Brent crude, the global oil benchmark, fell more than 5pc to around $104 a barrel on Wednesday after two supertankers carrying Iraqi oil to China successfully passed through the key shipping route.

A third vessel carrying Kuwaiti crude to South Korea was also tracked entering the strait before its transponder signal was switched off.

Mr Trump told reporters: “We’re in the final stages of Iran, we’ll see what happens.

“We’ll either have a deal or we’re going to do some things that are a little bit nasty. But hopefully that won’t happen.”

The three tankers were carrying about 6m barrels of oil between them, potentially the biggest single-day movement of crude out of the Gulf since fighting began in late February, fuelling hopes that energy flows from the region could gradually recover.

Despite the veiled threat, traders seized on hopes of a breakthrough. London’s FTSE 100 stock index rose 1.1pc, while the Nasdaq Composite gained 1.3pc on Wall Street.

Government borrowing costs also dropped sharply as markets scaled back expectations for further interest rate rises.

Benchmark UK 10-year gilt yields fell below 5pc for the first time since Andy Burnham announced his intention to return to Parliament.

Andrew Wishart, an economist at Berenberg Bank, said a genuine breakthrough could quickly improve the outlook for the British economy.

He said: “The positive effects could come through quite quickly.

“A lot of the squeeze we’re seeing on the real economy is because investors expect the Bank of England to have to raise interest rates.

“If oil prices have peaked, then quite quickly investors will probably no longer expect the Bank of England to raise interest rates. That could feed through to a drop in mortgage rates more or less immediately.”

Mr Wishart added that lower borrowing costs could also improve the Government’s finances, potentially giving the Chancellor an extra £15bn of budget headroom by the autumn.

However, energy analysts warned that investors may be getting ahead of themselves after several previous claims by Mr Trump that the war in Iran was close to an end.

Jorge León, head of geopolitical analysis at Rystad Energy, said: “There’s still a lot of uncertainty. We’ve seen many, many times him saying it’s almost there.”

Even if a full peace agreement is reached, Mr León said it could still take several months for oil production and shipping through the Strait of Hormuz to fully normalise. The waterway handled a fifth of the world’s oil and gas trade before the Iran war began.

Prices are also likely to remain well above pre-conflict levels because global stockpiles have been heavily depleted during the crisis.