Oil prices fell about 5% on Wednesday after reports indicated that the United States had presented Iran with a 15-point proposal aimed at ending the war, boosting hopes for progress toward a ceasefire, despite continued airstrikes between Israel and Iran.

Brent crude futures declined by $5.66, or 5.42%, to $98.83 per barrel as of 10:22 GMT, after touching $97.57 earlier in the session. US West Texas Intermediate crude fell by $4.82, or 5.22%, to $87.53, after hitting a low of $86.72.

Both benchmark crudes had risen about 5% on Tuesday before trimming gains in later volatile trading.

Despite the price decline driven by ceasefire expectations, analysts pointed to parallel reports of US troop deployments in the Middle East, reflecting continued uncertainty.

US President Donald Trump said on Tuesday that his country is making progress in negotiations to end the war, while a source confirmed that Washington had already presented the proposal to Iran.

However, some analysts expressed doubts about the seriousness of this progress, expecting market volatility to persist.

Larry Fink, CEO of BlackRock Inc., warned that continued threats by Iran to the Strait of Hormuz could keep oil prices between $100 and $150 per barrel for years, adding that “we will see a global recession” if prices reach $150.

Disruptions to oil shipments through Hormuz

Developments in the Middle East remain the main driver of oil price movements, as the war has led to a near halt in shipments of oil and liquefied natural gas through the Strait of Hormuz, which accounts for about one-fifth of global supplies.

The International Energy Agency described the situation as the largest disruption to oil supplies ever, with estimated daily losses of about 20 million barrels, implying a loss of roughly 500 million barrels over 25 days.

Analysts noted that the market remains tight despite the possibility of de-escalation, stressing that the resumption of flows through the strait does not necessarily mean a quick return of halted production, given uncertainty over the durability of any ceasefire agreement.

In this context, Iran informed the UN Security Council and the International Maritime Organization that “non-hostile” vessels may pass through the Strait of Hormuz, provided coordination with Iranian authorities.

To mitigate the impact of supply disruptions, oil exports from Saudi Arabia’s Yanbu port on the Red Sea rose to about 4 million barrels per day last week, compared to lower levels before the war.

Meanwhile, oil loading operations at Russia’s Primorsk and Ust-Luga ports on the Baltic Sea were halted after Ukrainian drone attacks triggered a major fire, in one of the largest strikes targeting Russian oil export facilities during the ongoing four-year war, adding to uncertainty in global markets.

The British pound held steady during Wednesday’s trading, as traders remained cautious about efforts to end the war between the United States and Israel on one side and Iran on the other, while assessing the potential economic implications of the conflict.

Sterling recorded little change against the US dollar, trading at $1.3402.

This came as Israel and Iran exchanged airstrikes, while the Iranian military rejected US President Donald Trump’s claims that Washington is holding direct negotiations with Tehran to end the war.

Meanwhile, oil prices declined, with Brent crude futures falling about 5.4% to $95.82 per barrel.

On the economic data front, official figures showed that UK inflation held steady at 3% in February, unchanged from January, ahead of expectations that it could rise again as the Middle East war impacts prices.

Luke Bartholomew, Deputy Chief Economist at Aberdeen, said the current inflation report “only reflects pre-war conditions,” noting that expectations have shifted significantly with the rise in energy prices.

Inflation expectations have risen notably since the outbreak of the war, driven by higher oil prices.

In a sign of the conflict’s impact on the British economy, a survey released on Tuesday showed that UK business activity grew at the slowest pace in six months in March, while manufacturing input costs recorded the largest monthly increase since 1992.

Bank of England interest rates

As economic expectations shift, interest rate expectations for the Bank of England have also changed.

Markets currently price about a 67% probability that the bank will raise interest rates at its next meeting in April, with expectations for at least two increases by the end of the year, compared to pre-war expectations of two rate cuts in 2026.

However, many economists appear more cautious than markets regarding the likelihood of rate hikes.

Andrew Wishart, Chief Economist at Berenberg, said the bank’s response will depend on whether rising energy prices lead to a broader inflation wave across goods and services, noting that he does not expect this to happen.

He added that slowing economic growth and slack in the labor market point to limited ability for companies to raise prices, as well as limited capacity for workers to demand wage increases, reducing the likelihood of an inflationary spiral.

At the close of trading, the British pound also held steady against the euro at 86.54 pence.

Gold prices jumped nearly 3% in European trading on Wednesday, extending their recovery for the second consecutive day from a four-month low, supported by continued buying at lower levels and by the decline in global oil prices, which helped ease concerns about accelerating global inflation.

These developments come after reports that the United States is working on a 15-point plan to end the war with Iran, with a one-month ceasefire potentially to be announced soon under a mechanism being developed by Witkoff and Kushner.

Price Overview

Gold prices today: gold rose about 3.0% to $4,602.50, up from the session opening level of $4,474.62, after hitting a low of $4,456.17.

At Tuesday’s settlement, gold gained 1.5%, marking its first gain in the past five days, as part of a recovery from a four-month low of $4,098.23 per ounce.

Global oil prices

Global oil prices fell more than 1% on Wednesday, extending losses for the third consecutive day, amid hopes of resolving supply disruptions from the Gulf region and reopening the Strait of Hormuz.

In an official statement, the Iranian government said that “non-hostile vessels belonging to or linked to other countries, provided they are not involved in or cooperating with aggressive operations against Iran and comply with declared safety and security procedures, are permitted safe passage through the Strait of Hormuz in coordination with the relevant Iranian authorities.”

There is no doubt that declining oil prices reduce concerns about accelerating inflation across most parts of the world and ease pressure on monetary policymakers at global central banks to raise interest rates.

War-ending negotiations

US President Donald Trump said on Tuesday that the United States and Iran are “currently in negotiations,” hinting that Tehran is keen to reach a peace agreement, despite the Islamic Republic denying any direct talks with Washington.

The New York Times reported that the United States has sent Iran a plan containing 15 key points to end the war in the Middle East.

Sources said that a one-month ceasefire will be announced under a mechanism being developed by Witkoff and Kushner, with negotiations on the fifteen points to take place during the ceasefire period.

US interest rates

Following the decline in oil prices, and according to the CME FedWatch tool, markets increased pricing for the probability of keeping US interest rates unchanged at the April meeting from 92% to 95%, while the probability of a 25-basis-point rate hike declined from 8% to 5%.

To reassess these expectations, investors are closely monitoring further economic data releases from the United States, in addition to tracking comments from Federal Reserve officials.

Gold outlook

Goldman Sachs said the recent decline in gold prices is largely consistent with historical patterns, citing rising interest rate expectations and market volatility as key factors behind the drop.

The bank maintained a structurally positive outlook, expecting gold to reach $5,400 by year-end, supported by continued central bank buying as countries seek to diversify into assets with lower “geopolitical and financial risks.”

SPDR fund

Holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, increased by 0.29 metric tons on Tuesday, marking the first daily increase since March 11, bringing the total to 1,052.99 metric tons, rebounding from 1,052.70 metric tons, the lowest level since December 17.

The British pound fell in European trading on Wednesday against a basket of global currencies, extending its losses for the second consecutive day against the US dollar and pulling back from a two-week high, due to corrective moves and profit-taking, under pressure from the strength of the US currency amid investor doubts about a quick resolution to the conflict in the Middle East.

As expectations rise for the Bank of England to raise interest rates in April to address the impact of the Iran war and higher energy prices, markets are awaiting later today the release of key UK inflation data for February to reassess existing expectations for British interest rates.

Price Overview

British pound exchange rate today: the pound fell 0.2% against the dollar to $1.3384, down from the session opening level of $1.3407, after reaching a high of $1.3436.

The pound lost 0.1% against the dollar on Tuesday due to corrective moves and profit-taking, after recording a two-week high of $1.3480 in the previous session.

US dollar

The dollar index rose 0.2% on Wednesday, maintaining gains for the second consecutive session, reflecting the continued strength of the US currency against a basket of global currencies.

The rally comes as investors continue buying the dollar as a preferred safe-haven asset, amid strong doubts about the possibility of quickly ending the conflict in the Middle East, and that negotiations to end the Iran war will be complex and require a prolonged period to reach a peace agreement acceptable to all parties.

UK interest rates

The Bank of England kept interest rates unchanged last week for the second consecutive meeting.

All nine members of the Monetary Policy Committee (MPC) voted to hold rates steady, marking a notable shift after some members had previously leaned toward cutting rates.

The bank indicated that the “shock” of the war between the United States, Israel, and Iran has led to a sharp rise in global energy prices, which will increase fuel and utility bills for UK households and businesses.

The bank warned that inflation will rise in the near term (between 3% and 3.5%) due to higher energy prices, after previously showing signs of easing toward the 2% target before the conflict erupted.

Following the meeting, markets increased pricing for the probability of a rate hike by the Bank of England at the April meeting from 0% to 15%.

UK inflation data

To reassess expectations for UK interest rates, investors are awaiting later today the release of key inflation data for February, which is expected to have a significant impact on the Bank of England’s monetary policy path.

At 07:00 GMT, the headline consumer price index is expected to rise 3.0% year-on-year in February, unchanged from the previous reading, while the core CPI is also expected to remain steady at 3.1% year-on-year.

Outlook for the British pound

We expect here at Economies.com that if UK inflation data comes in above market expectations, the probability of a rate hike in April will increase, which would help reduce the current losses in the British pound.