Oil prices saw a significant drop while stock markets experienced a boost following President Donald Trump’s announcement regarding the potential end of the conflict with Iran. Trump indicated the strategic Strait of Hormuz would remain “open to all” if Tehran agrees to a deal with Washington. Via social media, Trump 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.” Despite this, he warned that failure to reach a deal could result in intensified bombing campaigns.
In a move to facilitate negotiations, the president declared a temporary halt to the “Project Freedom” operation, which has been escorting ships through the Strait of Hormuz amid a blockade by Iran since late February. This blockade had led to a global energy crisis by restricting a key maritime route responsible for about 20% of the world’s oil supplies. However, Trump emphasized that the blockade of Iranian ports would persist during this pause. In response, Iran’s Revolutionary Guards’ Navy assured that safe passage through the strait would be maintained, marking Iran’s first response to the U.S. pausing its naval operations intended to aid stranded vessels.
The announcement had a significant impact on global oil markets. Brent crude oil, which had previously surged by 6% earlier in the week due to escalating tensions in the Middle East, plummeted by 11% to $97 per barrel, marking its first dip below $100 since April 22. Wholesale gas prices also declined, with the British June contract dropping 6.3% to 107.8p a therm. Meanwhile, airline stocks gained as the prospect for international travel improved. Reports suggested that the White House was nearing a one-page memorandum of understanding to conclude the war with Iran, setting a framework for future detailed nuclear discussions. However, Iran dismissed this as an “American wishlist [and] not a reality,” which led to oil prices partially recovering, closing down 7.3% at $101.83 a barrel.
The Revolutionary Guards’ statement, while acknowledging the end of U.S. threats and introducing unspecified new procedures, expressed gratitude to shipowners and captains for adhering to Iranian regulations while navigating the strait. The recent surge in oil prices to $126 per barrel, the highest since 2022, followed Trump’s earlier comment that the U.S. blockade on Iranian ports could extend for months amidst stalled peace talks.
European stock markets reacted positively to the developments, with the UK’s FTSE 100 index climbing 2%, France’s Cac 40 increasing by 3%, and Germany’s Dax rising by 2.1%. Additionally, MSCI’s All-Country World Index achieved a record high with a 1.6% increase, alongside similar milestones for its emerging markets benchmark and its broadest Asia Pacific shares index outside Japan, which rose by 2.5%.
