In a significant development, oil prices saw a decline while stock markets experienced a rise following U.S. President Donald Trump’s announcement that the conflict with Iran could potentially end. Trump stated that the Strait of Hormuz would remain “open to all” if Tehran agrees to a deal with Washington. Through social media, he expressed optimism: “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.” He also warned that failure to reach an agreement would lead to intensified military actions.
Trump’s statement came in the wake of his decision to temporarily pause the “Project Freedom” operation, which involved escorting ships through the strategic strait, a crucial passageway for about 20% of the world’s oil supplies. This operation had been ongoing due to Iran’s blockade since late February, which had sparked a global energy crisis. While Trump indicated that the blockade of Iranian ports would persist, his pause aimed to create an opportunity to finalize a potential deal with Tehran. Responding to this development, Iran’s Revolutionary Guards’ Navy announced that safe passage through the strait would be ensured with the cessation of U.S. threats, though they did not detail the new procedures.
The initial news led to a sharp drop in Brent crude oil prices, which had surged by up to 6% earlier in the week due to escalating tensions in the Middle East. Prices fell by 11% to a low of $97 a barrel, marking the first time they dipped below $100 since April 22. The wholesale gas market also responded positively, with the British June contract dropping by 6.3% to 107.8p a therm. Airline stocks benefited from the improved outlook for international travel. Reports suggested the White House was nearing a one-page memorandum of understanding with Iran to end hostilities, aiming to establish a framework for detailed nuclear discussions.
Despite the initial decline, oil prices rebounded slightly later in the day, trading at $101.83 a barrel following Iran’s dismissal of the deal as an “American wishlist” rather than reality. The announcement from the Revolutionary Guards did not specify the new procedures but acknowledged shipowners and captains who complied with Iranian regulations. Last week, oil prices had peaked at $126 a barrel, the highest since 2022, as Trump’s comments indicated a prolonged blockade of Iranian ports and stalled peace negotiations.
European stock markets responded positively to these developments, with notable increases across major indices. The UK’s FTSE 100 index climbed by 2%, France’s Cac 40 rose by 3%, and Germany’s Dax saw a 2.1% increase. Additionally, MSCI’s All-Country World Index reached a new record, rising by 1.6%, alongside similar achievements for its emerging markets benchmark and its broadest index of Asia Pacific shares outside Japan, which increased by 2.5%.