Oil prices reversed course after Monday’s massive gains after a Reuters report said Saudi Arabia’s oil output would be restored to normal levels faster than initially expected. Drone attacks on two key oil facilities in the country have been the source of heightened geopolitical tension between the U.S. and Iran.
Brent crude, the international benchmark, plummeted $4.70 or 6.8%, to $64.31 a barrel. Brent had soared as much as 19.5% in the previous session, its biggest jump on record.
U.S. West Texas Intermediate crude dropped $3.93 or 6.2%, to about $59.
President Donald Trump said on Monday that it was likely Iran was behind the attacks on oil plants, estimated to have wiped out 5% of global crude supply, but stressed that he did not want to go to war. Iran has rejected U.S. charges it was behind the attacks, while President Hassan Rouhani suggested it was a reciprocal response from Yemen’s Houthi rebels.
Developments in the U.S.-China trade dispute also remain in sharp focus. The U.S. Trade Representative’s office said on Monday that deputy-level talks between the world’s two largest economies are set to start in Washington on Thursday, paving the way for high-level talks in October intended to resolve the drawn-out trade war.
Investor focus is also attuned to impending policy meetings for the U.S. Federal Reserve and the Bank of England this week.
On Wall Street, stocks fell as investors kept tabs on the latest Fed meeting, which concludes on Wednesday. Market expectations for a 25 basis-point rate cut were at 63.5%, according to the CME Group’s FedWatch tool. However, the possibility of the Fed keeping rates unchanged has risen lately.
In corporate news, German lighting group Osram Licht has advised shareholders to accept a 4.3 billion euro ($4.8 billion) bid for the company from Austrian chipmaker AMS.
On the data front, investor sentiment polls out of Germany showed move improving more than expected in September, the ZEW indicator rising 21.6 points to a -22.5 reading, versus -37.0 expected by economists in a Reuters poll. However, the ZEW Institute cautioned that the outlook for Europe’s largest economy remains negative amid trade disputes and Brexit uncertainty.
Stocks on the move
At the other end of the European blue chip index, Zalando shares tumbled 9.5% after Swedish investment firm Kinnevik sold its stake in the German e-commerce company.