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Oil prices fall to August lows as U.S.-Iran tensions ease

Oil prices fell to their lowest since late August as hopes of easing U.S.-Iran tensions grew, and European and Asian stock markets rebounded. Lower fuel costs matter for drivers, while European power prices hit 2022 highs.

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Oil prices fell to their lowest level since late August, reaching a 10-week low. The move followed comments from President Donald Trump, who said new U.S. strikes on Iran were "highly unlikely". Optimism about a possible deal with Iran added to the decline, even as attacks in the region continued.

Not all the news pointed toward calm. Attacks on Saudi Arabia included a strike on the vital East-West pipeline, along with fresh incidents involving tankers in the Strait of Hormuz. Together, these events showed that risks to Middle Eastern oil supplies were still present.

Confidential correspondence from former Iranian officials describes how Iran has relied on oil terminals and storage sites in China. Ali Shamkhani, once a political adviser to the former supreme leader Ali Khamenei, wrote the letters to Hamid Bovard, who formerly ran the National Iranian Oil Company. The documents indicate that these sites let Iran deliver crude to its largest customer, while tankers under sanctions kept sailing even though the United States restricts Iranian oil exports.

China's imports of crude oil rebounded as more oil flowed from the Persian Gulf. The recovery came at a time when the wider region was still facing attacks and security concerns.

In Europe, a still and cloudy weather front at the start of the week pushed power prices for peak evening hours to 2022 highs. Wind and solar output slumped across the UK, Germany and France, the region's largest power markets, and was expected to stay below normal until at least the middle of the week. The wind slump was especially pronounced in Germany, the UK, Belgium and the Netherlands.

In the United States, gas prices have dropped below $4 a gallon. Fuel costs for Thanksgiving are still expected to be the highest since 2000, so holiday travelers will feel the strain even as pump prices ease.

European and Asian stock markets rebounded as lower oil prices supported sentiment, though Asian shares remained fragile. Bond yields in the US and eurozone turned higher. A bond yield is the return an investor earns on a government bond, and it moves in the opposite direction to the bond's price. The FTSE 100 edged up despite turmoil at Nvidia, which was hitting US stock futures, and the Nasdaq rose nearly 3% as US exchanges closed higher.

For households, cheaper fuel at the pump and higher electricity prices in parts of Europe point in different directions. The bond market moves and the oil swings show how quickly conditions can shift across regions.

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