What happened
Oil is now cheaper than at any point since the Middle East conflict began. Brent crude, the global benchmark, has dropped below 70 dollars a barrel, down more than 38 percent from its wartime peak of over 126 dollars on 30 April.
The turning point was the memorandum of understanding signed by the United States and Iran on 18 June, which ended the conflict and reopened the Strait of Hormuz, the vital shipping channel that had been effectively closed since 28 February.
The slide has been relentless since. Brent averaged 85 dollars in June, a full 22 dollars below its May average, then broke below 70 in early July and has stayed weak as diplomacy holds, with Qatar reporting continued progress in talks between Washington and Tehran.
Energy markets more broadly have followed crude lower in recent days, reversing much of the price shock that dominated the first half of 2026.
Why it matters
Oil is the price behind other prices. It fuels lorries, ships, planes and factories, so when crude falls nearly 40 percent, the cost of making and moving almost everything eventually falls with it.
For central banks, this is the break they have been waiting for. The energy spike was the main reason UK inflation risks lingered and why three Bank of England policymakers recently voted to raise rates. Sustained cheap oil pulls inflation down and reopens the door to rate cuts on both sides of the Atlantic.
There are losers too. Oil producers and energy majors such as BP and Shell earn less per barrel, which weighs on their shares and on the FTSE 100, where energy carries a heavy weight.
Explained simply
The Strait of Hormuz is the narrow garden gate through which a fifth of the world supply of oil must pass. With the gate bolted shut, buyers bid frantically for what was already through; now the gate is open again, the queue has vanished and the price has collapsed.
Oil prices are set minute by minute by traders weighing supply against demand. When the strait closed in February, a huge share of global supply was suddenly trapped, and the fear of scarcity, not actual empty tanks, drove the price from around 80 dollars to more than 126.
A memorandum of understanding is not a full treaty; it is a formal written agreement setting out what both sides intend to do. Markets do not need the paperwork perfected, they simply need tankers moving, and tankers are moving.
Prices fell fastest once traders became convinced the reopening would last. Markets price the future, so oil today reflects the supply the world expects next month, not just the barrels available this morning.
What it means for you
The most visible effect arrives at the petrol forecourt. Pump prices typically follow crude with a lag of two to four weeks, so the latest falls should keep feeding through to UK petrol and diesel prices through August.
Household energy bills move more slowly, because the Ofgem price cap is reset quarterly using wholesale prices from earlier months. If oil and gas stay near current levels, the effect shows up in the caps set for the autumn and winter, potentially trimming a typical annual bill.
Cheaper energy also strengthens the case for interest rate cuts, which would eventually mean cheaper fixed-rate mortgage deals. Savers should note the flip side: the same cuts would slowly pull easy-access savings rates down from around 4 percent.
The bigger picture
The journey from 126 dollars to under 70 in three months is one of the fastest peacetime reversals in the modern oil market, and it shows how much of the spike was fear rather than fundamentals.
Two things could interrupt the slide: a breakdown in the fragile US-Iran arrangement, or a decision by OPEC producers to cut output and defend prices. Watch both, because between them they will decide whether cheap oil is a windfall or just a pause.
