Oil prices experienced a decline and stock markets saw gains following President Donald Trump’s announcement that the conflict with Iran could come to an end, with the Strait of Hormuz potentially reopening for all, contingent upon a deal with Tehran. Trump took to social media, suggesting that if Iran agrees to previously discussed terms, the tension-filled scenario he termed “Epic Fury” would cease, and the blockade impacting the strategic waterway would be lifted. However, he warned that failure to reach an agreement would result in intensified bombing campaigns.
This development follows Trump’s decision to temporarily halt “Project Freedom,” an operation aimed at escorting vessels through the Strait of Hormuz, a crucial channel for about 20% of the global oil supply, which Iran has blockaded since late February. The blockade has significantly impacted the energy markets worldwide. While Trump paused the operation to negotiate with Iran, he maintained that the blockade on Iranian ports would persist. In response, Iran’s Revolutionary Guards’ Navy indicated that safe passage through the strait would now be assured as U.S. threats diminish, marking Iran’s initial reaction to the U.S. pause in operations.
The potential de-escalation initially caused Brent crude oil prices to plummet by 11%, reaching $97 a barrel, marking the first time it dipped below $100 since late April. Similarly, wholesale gas prices saw a decrease, with the British June contract dropping by 6.3%. The news also buoyed airline stocks, reflecting optimism about international travel prospects. Earlier reports suggested that the White House was nearing a memorandum of understanding to conclude the conflict with Iran, laying the groundwork for more comprehensive nuclear discussions.
Despite the initial drop, oil prices partially recovered later, with a 7.3% decrease to $101.83 a barrel, as Iranian officials dismissed the U.S. proposal as merely an “American wishlist.” The Revolutionary Guards’ statement did not clarify the new procedures for the strait but expressed gratitude to shipowners and captains for complying with Iranian regulations. The oil market had recently reached highs of $126 a barrel, driven by concerns over a prolonged U.S. blockade and stalled peace talks.
European stock markets responded positively to these developments. The UK’s FTSE 100 index increased by 2%, France’s Cac 40 climbed 3%, and Germany’s Dax rose 2.1%. The MSCI’s All-Country World Index also set a new record with a 1.6% increase, alongside notable gains in its emerging markets benchmark and the broad Asia Pacific shares index outside Japan, which grew by 2.5%.