Oil prices experienced a decline while stock markets saw an uptick following statements by Donald Trump, indicating a potential end to hostilities with Iran and the opening of the Strait of Hormuz, contingent on Tehran reaching an agreement with Washington. The U.S. president took to social media, expressing that if Iran fulfills its commitments, the ongoing conflict, referred to as “Epic Fury,” would cease, and the blockade would allow free passage through the crucial strait, including for Iranian vessels. However, Trump warned of escalated military action should Iran fail to make a deal, stating that bombing would resume at a heightened level.
Prior to this, Trump had announced a temporary halt to “Project Freedom,” a U.S. operation aimed at safeguarding maritime passage through the Strait of Hormuz, a vital route for approximately 20% of the world’s oil supply. This waterway had been under an Iranian blockade since late February, contributing to a global energy crisis. Although the operation was paused to facilitate negotiations with Tehran, Trump affirmed that the blockade on Iranian ports would persist. In response, Iran’s Revolutionary Guards’ Navy indicated that new measures would ensure safe passage through the strait, marking their first comment on the U.S. decision to pause its operations.
Following the news, Brent crude oil, which had surged by as much as 6% earlier in the week due to recent Middle Eastern conflicts, dropped significantly by 11% to $97 a barrel, marking its first dip below $100 since April 22. Wholesale gas prices also declined, with the British June contract decreasing by 6.3% to 107.8p per therm. Concurrently, airline stocks benefited from the improved outlook for international travel. The oil price drop was further accelerated by reports suggesting the White House was close to finalizing a memorandum of understanding with Iran to conclude the conflict, with both nations prepared to establish a framework for detailed nuclear discussions.
Despite the initial decline, oil prices later regained some ground, reducing losses to 7.3% and trading at $101.83 per barrel, as Iran dismissed the U.S. proposal as an “American wishlist” rather than a tangible agreement. The Revolutionary Guards’ statement did not detail the new procedures but expressed gratitude to shipowners and captains for adhering to Iranian regulations while navigating the strait.
The announcement of potential peaceful resolutions led to a rally in European stock markets. The UK’s FTSE 100 index climbed by 2%, while France’s Cac 40 increased by 3%, and Germany’s Dax rose by 2.1%. Globally, MSCI’s All-Country World Index achieved a 1.6% increase, reaching a new record alongside its emerging markets and Asia Pacific shares indices, which also saw significant gains.