Oil prices dropped on Monday despite the reinstated US sanctions on Iran coming into force.

Donald Trump pulled the US out of the Iran nuclear deal earlier this year, and market experts had predicted that the renewed sanctions would drive oil prices up due to concerns over lack of supply.

However, global benchmark Brent crude was down 0.25 per cent at $72.65 (£55.93) per barrel in early trading, while US benchmark WTI dropped 0.43 per cent to $62.87 (£48.39).

Analysts have said the latest round of sanctions are not as harsh as they expected, and eight countries including India and China have been granted exemptions, meaning several major economies are still buying Iranian oil.

Hussein Sayed, chief market strategist at FXTM, said: “US sanctions on Iran proved to be less severe than previously anticipated. Exempting eight countries... means Iranian oil will continue to flow and there’s no longer risk of a supply shortage.”

Meanwhile, Fiona Cincotta, senior market analyst at City Index, said the sanctions were “turning into a damp squib”.

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“Not only did some of the USA’s biggest opponents say that they will outright defy the sanctions, but the US has now also watered down the rules allowing eight major buyers to continue buying Iranian fuel,” she said.

However, experts noted that the price of Brent crude has fallen by 16 per cent since reaching a high of more than $86 in October, and said this was mainly driven by a drop in demand due to slowdown in the global economy.

Ms Cincotta added: “While a lot of industries needing oil as a raw material will welcome a decline in oil prices, these numbers will start hurting big oil companies and will be visible in the next set of results.”

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