British motorists may soon benefit from lower petrol and diesel prices after crude oil fell to its lowest level in three months amid hopes of a diplomatic breakthrough between the United States and Iran.
Brent crude dropped to around $85 per barrel on Friday, extending a sharp decline from April’s peak of $120 per barrel when tensions in the Middle East escalated. The fall has been driven by growing expectations that negotiations between Washington and Tehran could eventually reduce regional supply risks.
The decline in oil prices has already filtered through wholesale fuel markets. European oil prices have fallen around 20% since reaching their peak in mid-May, although analysts caution that consumers typically experience a delay of between two and four weeks before lower wholesale costs are reflected at the pump.
According to the AA, average UK petrol prices have already fallen by 3p per litre since the start of June to 156.8p per litre, the lowest level since early April. Diesel prices have dropped by 5p to 178.7p per litre.
The RAC believes there is scope for further reductions, forecasting that petrol could fall by at least another 4p per litre while diesel prices could decline by as much as 8p per litre if current wholesale trends continue.
Lower prices have also been supported by increased fuel production from US refineries, which have shifted output towards diesel, petrol and jet fuel, helping to boost supply and ease pressure on global markets.
Despite recent declines, fuel remains significantly more expensive than before the Middle East conflict intensified. Wholesale gasoil prices remain around 36% above pre-conflict levels, while petrol prices are still approximately 20% higher than they were before disruptions began.
Analysts note that the recent fall in crude prices is not solely due to hopes of a peace agreement. Weaker Chinese demand has also played an important role, with China drawing heavily on domestic stockpiles and reducing oil imports by an estimated four million barrels per day.
Meanwhile, some oil exports are gradually returning to international markets as more tankers navigate routes through the Strait of Hormuz, partially restoring Gulf supply flows.
While a formal agreement between the US and Iran could drive prices lower still, market observers believe oil is unlikely to return immediately to pre-conflict levels due to ongoing geopolitical uncertainty and the continued strategic importance of the Strait of Hormuz.
For UK consumers, however, the direction of travel appears positive, with further reductions in fuel costs likely over the coming weeks if oil prices remain subdued.
