Oil prices experienced a significant drop while global stock markets saw an upswing following President Donald Trump’s announcement that the conflict with Iran could come to an end, potentially reopening the strategic Strait of Hormuz if Tehran reaches an agreement with Washington. In a social media post, Trump expressed optimism, stating that if Iran fulfills its commitments, the current conflict dubbed ‘Epic Fury’ would cease, and the Strait of Hormuz would once again be accessible to all nations, including Iran. Nevertheless, he warned that failure to reach a deal would result in intensified military action against Iran.
Trump’s comments followed his decision to temporarily halt the “Project Freedom” operation, which involved escorting ships through the Strait of Hormuz. This waterway, crucial for transporting about 20% of the world’s oil, has been under an Iranian blockade since February, exacerbating the global energy crisis. The U.S. president mentioned that the pause in operations would allow time to finalize negotiations with Tehran, although the blockade on Iranian ports would continue. Iran’s Revolutionary Guards’ Navy responded by stating that safe passage through the strait would be ensured with the cessation of U.S. threats and the implementation of new procedures, although specifics were not disclosed.
The announcement initially caused Brent crude oil prices to plummet by 11%, reaching a low of $97 per barrel, marking the first dip below $100 since April 22. Similarly, wholesale gas prices saw a decline, with the British June contract falling by 6.3%. Airline stocks benefited from the improved outlook for international travel, contributing to the overall market uptrend. The decline in crude prices was further spurred by reports suggesting the White House was nearing a memorandum of understanding with Iran to end hostilities, setting the stage for more detailed nuclear discussions.
However, oil prices later moderated their losses, with Brent crude trading down by 7.3% at $101.83 per barrel after Iran dismissed the U.S. proposal as unrealistic. Despite the initial dip, oil prices had recently surged to $126 a barrel, the highest since 2022, amid prolonged U.S. port blockades and stalled peace negotiations.
European stock markets responded positively, with the UK’s FTSE 100 index climbing 2%, France’s Cac 40 gaining 3%, and Germany’s Dax rising by 2.1%. The MSCI’s All-Country World Index achieved a new record, increasing by 1.6%, alongside notable gains in its emerging markets and Asia Pacific shares indices, which rose by 2.5% outside of Japan.