Oil prices have fallen below $90 a barrel for the first time since August, amid renewed hopes for a Middle East ceasefire deal and an uptick in traffic through the Hormuz strait.

Brent crude dropped below the symbolic milestone on Tuesday morning, after Donald Trump declared the war with Iran was “effectively over” at a White House press conference.

The President said the US remained “locked and loaded, ready to go for any reason” should there be a further re-escalation of tensions. But he added the two parties were nearing an agreement.

“We’re seeing momentum towards the end of the conflict,” he told reporters. “I think it’s going to be ending fairly soon.”

Brent, the international benchmark, has remained well above $90 a barrel for over three months thanks to the stranglehold Iran and its satellite militia the Houthis have maintained over the Middle East’s two main shipping lanes.

Countries across the region have been increasingly swept up in the conflict, further stoking oil prices. Saudi Arabia has been targeted in a barrage of Houthi strikes, including on energy infrastructure and three of its international airports.

Despite the offensive, traffic out of the Strait of Hormuz shipping lane has picked up substantially. Exports of liquefied natural gas (LNG) through the vital trade artery reached the highest total since the onset of the war last month, alongside a parallel uptick in crude traffic.

Ceasefire hopes ‘offsetting’ attacks on Saudis in oil market

Brent fell two per cent on Tuesday, extending an easing in the supply-constrained market that saw crude prices tumble 17 per cent last week. The benchmark is now trading more than 25 per cent lower than its late-October peak of $117 a barrel.

David Mirzai, research analyst at SP Angel, said the diplomatic efforts to end the eight-month war were “offsetting continued attacks on Saudi Arabia by the Houthis and Iran on marine vessels travelling through the Strait of Hormuz”.

The drop oil price also presaged a rally in both equities and government bonds, as traders pared back bets on the inflationary impact of the war. Gilt yields fell across both long- and short-durations. The two-year gilt yield, which closely tracks inflation and interest rate expectations, has dropped more 20 basis points since a peak of 4.95 per cent struck in late October. The yield on the 10-year has fallen more than 30 basis points over the same period.

“10-year gilt yields have fallen almost 25bps [basis points] since the Autumn Budget,” Deutsche Bank strategist Shreyas Gopal said. “Global factors, such as the welcome fall in oil prices, have undoubtedly played a large role in this fall in borrowing costs, alongside an increase in equity market volatility.

“But as our chart of the week shows, UK bonds have also outperformed on a relative basis since the Budget. Indeed, 10-year gilt yields have fallen by about 12bps more than their US and German equivalent.”