Global oil prices saw a significant drop while stock markets experienced an upswing following statements from President Donald Trump indicating that tensions with Iran could soon de-escalate. Trump suggested the conflict would conclude and the strategic Strait of Hormuz would be accessible to all if Iran were to negotiate a deal with the United States. On social media, he remarked, “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 the optimistic outlook, Trump warned that without an agreement, military actions would resume with increased intensity. This development comes as Trump paused his “Project Freedom” initiative, a protective measure for vessels traversing the strait, which is pivotal to global oil transport and has been under Iranian blockade since late February, exacerbating a worldwide energy crisis. The blockade of Iranian ports, however, will persist, according to Trump, even as negotiations continue. Iran’s Revolutionary Guards’ Navy responded by affirming that safe passage through the strait would be ensured, aligning with the cessation of U.S. threats and the establishment of new protocols.
The market responded swiftly to these updates, as Brent crude oil, which had surged by 6% earlier in the week due to escalating Middle Eastern tensions, plummeted by 11% to $97 a barrel, marking its first dip below $100 since April 22. Concurrently, wholesale gas prices dropped, with British contracts for June decreasing by 6.3% to 107.8p per therm, while airline stocks saw a boost from the potential for enhanced international travel. The decline in crude prices accelerated following reports suggesting that the White House was nearing a memorandum of understanding with Iran to cease hostilities, setting a stage for further nuclear negotiations.
However, the optimism was tempered as oil prices later rebounded, reflecting a 7.3% decline to $101.83 a barrel. The Iranian response termed the U.S. proposal as an “American wishlist” rather than a concrete agreement. The Revolutionary Guards’ statement did not clarify the specifics of the new transit procedures but acknowledged the cooperation of shipowners and captains adhering to Iranian regulations in the waterway.
European stock markets mirrored this optimism with notable gains; the FTSE 100 in the UK rose by 2%, France’s Cac 40 increased by 3%, and Germany’s Dax climbed 2.1%. The MSCI All-Country World Index also advanced by 1.6% to a new peak, alongside similar records in its emerging markets benchmark and the broad Asia Pacific shares index outside Japan, which rose by 2.5%.