Oil prices experienced a significant drop while stock markets saw an upward trend following President Donald Trump’s announcement suggesting a potential end to the conflict with Iran. Trump indicated that the Strait of Hormuz would become accessible to all if Tehran reached an agreement with Washington. In a social media post, the US president stated, “Assuming Iran agrees to give what has been agreed to, which is, perhaps, a big assumption, the already legendary Epic Fury will be at an end, and the highly effective Blockade will allow the Hormuz Strait to be OPEN TO ALL, including Iran.” However, he warned that failure to reach a deal would result in intensified bombing.
Trump’s comments came alongside a brief suspension of his “Project Freedom” initiative, aimed at escorting ships through the strategically significant Strait of Hormuz. This waterway, crucial for about 20% of the world’s oil supply, has been under Iranian blockade since late February, causing a global energy crisis. The president clarified that while the escort operation would pause temporarily to facilitate negotiations with Iran, the blockade of Iranian ports would persist. In response, Iran’s Revolutionary Guards’ Navy assured that safe passage through the strait would be guaranteed once US threats ceased, marking Iran’s first reaction to the US’s operational pause.
The announcement initially caused Brent crude oil prices to plummet by 11%, reaching as low as $97 per barrel, marking the first dip below $100 since April 22. The decline in oil prices was accompanied by a decrease in wholesale gas prices, with the British June contract dropping 6.3% to 107.8p per therm. The prospect of improved international travel prospects buoyed airline stocks. The decline in crude prices was further accelerated by reports suggesting the White House was nearing a one-page memorandum of understanding to end hostilities with Iran, potentially setting the stage for detailed nuclear discussions.
Despite the initial drop, oil prices partially recovered later in the day, trading down 7.3% at $101.83 per barrel after Iran dismissed the news as an “American wishlist [and] not a reality.” The Revolutionary Guards did not elaborate on the new procedures for the strait but expressed gratitude to shipowners and captains for adhering to Iranian regulations while navigating the waterway. Just a week prior, oil prices had surged to $126 per barrel, their highest level since 2022, following Trump’s comments about a prolonged blockade of Iranian ports.
European stock markets responded positively to the developments. The UK’s FTSE 100 index climbed 2%, France’s Cac 40 rose by 3%, and Germany’s Dax increased by 2.1%. Globally, MSCI’s All-Country World Index achieved a new record, rising 1.6%, alongside similar gains for its emerging markets benchmark and its broadest index of Asia Pacific shares outside Japan, which saw a 2.5% increase.