The Middle-East "war-premium" in current oil prices is poised to fall after a tentative breakthrough on Iran's nuclear programme over the weekend, offering a soothing tonic for battered equity markets across the world.
Baroness Ashton, the EU's diplomatic chief, said talks between Iran and six world powers had been "constructive and useful". The two sides agreed to fresh negotiations in May.
"We expect that subsequent meetings will lead to concrete steps towards a comprehensive negotiated solution which restores international confidence in the exclusively peaceful nature of the Iranian nuclear programme," she said.
Alaeddin Boroujerdi, head of the foreign policy in Iran's parliament, said the new approach was a "big development" and might clear the way for an end to sanctions.
Analysts say fear of conflict in the Gulf has added $10 to $15 a barrel to the price of oil. The rapprochement comes after OPEC producers agreed to crank up crude output to cool the overheated market.
Saudi oil minister Ali al-Naimi said his country aims to avert the sort of oil shock that followed last year's Arab Spring, which sent the global economy into a skid.
"We are seeing a prolonged period of high oil prices. We are not happy about it. Saudi Arabia is determined to see a lower price and is working towards that goal," he said. It is understood that the Saudis are producing 10m barrels a day (b/d), a 30-year high.
The International Energy Agency said last week that the global oil market was now over-supplied by 1.3m b/d, helping to rebuild depleted stocks. Inventories have risen sharply in the OECD rich states though they are still below the five-year average.
The agency said the supply surge points to a "clear shift from the seemingly relentless tightening evident over the prior 10 quarters".
Barclays Capital said it was downgrading its estimates for US crude prices this year by $5 to $105, saying the US oil market will be "depressed for years".
It is a dramatic change in mood from March when Brent crude reached record highs in euros and sterling, and energy costs threatened to cross the danger line of 9pc of global GDP the level that has typically triggered recessions in the past.
Iran's President Mahmoud Ahmadinejad appeared to undercut his own negotiators, vowing that his country "will not retreat an iota" on nuclear policy.