Global oil prices dipped while stock markets experienced a surge following President Donald Trump’s announcement that tensions with Iran could de-escalate, resulting in the reopening of the Strait of Hormuz if a deal is struck. Trump suggested via social media that should Iran comply with previously agreed terms, the conflict dubbed “Epic Fury” would conclude, and the strategic waterway would be accessible to all, including Iran. He cautioned, however, that failure to reach an agreement could lead to intensified military actions.
Trump’s remarks came after he declared a temporary halt to “Project Freedom,” a US operation that has been escorting vessels through the Strait of Hormuz, a crucial passage for about 20% of the world’s oil supply. This operation was initiated after Iran blocked the strait in late February, sparking an energy crisis worldwide. Although Trump paused the operation to negotiate with Tehran, he confirmed that the blockade on Iranian ports would persist. In response, Iran’s Revolutionary Guards’ Navy commented that the US’s pause could ensure safe passage through the strait, marking their first public reaction to the development.
The immediate impact of these developments was a significant drop in Brent crude oil prices, which fell by 11% to $97 a barrel, the first decline below the $100 mark since April 22. This drop followed heightened market activity earlier in the week due to Middle East tensions. Alongside oil, wholesale gas prices also decreased, with the British June contract dropping 6.3% to 107.8p per therm. Meanwhile, airline stocks benefited from the improved outlook for international travel. The oil price decline was further accelerated by reports that the White House was nearing a memorandum of understanding with Iran to end hostilities, although Iran dismissed these claims as unrealistic.
Despite the initial drop, oil prices later recovered some ground, trading at $101.83 a barrel, down 7.3% as Iran described the US proposals as an “American wishlist” rather than a feasible agreement. The statement from Iran’s Guards did not specify new operational procedures but expressed appreciation for shipowners and captains who have adhered to Iranian regulations during this period.
European stock markets saw positive movements amid these developments. The UK’s FTSE 100 index climbed by 2%, while France’s Cac 40 and Germany’s Dax rose by 3% and 2.1%, respectively. Additionally, the MSCI’s All-Country World Index increased by 1.6% to a new record high, accompanied by similar gains in its emerging markets benchmark and Asia Pacific shares index, excluding Japan, which rose by 2.5%.