Westpac economist says Iran peace deal could see petrol return to under $3 a litre

Good news for Kiwi motorists could be on the way, with Westpac economists estimating the price of petrol could soon fall back under $3 a litre for 91, if the Iran-US peace deal holds.

Oil prices have fallen about 4 percent following the United States and Iran announced an agreement to halt hostilities.

Brent crude is now trading at US$84 (NZ$143) a barrel. It follows a similar drop in prices on Friday.

Westpac chief economist Kelly Eckhold said the deal was good news for New Zealand as it would lead to lower prices at the pump and could boost consumer and business confidence.

"Based off the pricing on Friday night, we sort of estimated perhaps 91 around $2.80 or $2.90 would be reasonable. Actually prices have fallen a bit further since then, so you know that looks even more likely, as long as these oil futures can sustain these prices for a week or two," he said.

While the New Zealand economy was likely to have had negative growth in the second quarter, confidence could bounce back quickly if the peace deal holds and growth could return to the New Zealand economy in the third or fourth quarter of the year, Eckhold said.

"That will be a welcome change in sentiment to what we have been saying for the last three or four months," he said.

Eckhold said there was still a need for caution and a need to see how the details of the deal shakes out.

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