Oil prices saw a significant decline while stock markets experienced a rise following statements by Donald Trump suggesting a possible resolution to the ongoing conflict with Iran. The U.S. President indicated that the war could end, and the strategically crucial Strait of Hormuz would be accessible to all, should Iran reach an agreement with Washington. Trump communicated via social media that if Iran consents to previously discussed terms, the “already legendary Epic Fury will be at an end,” facilitating open passage through the Strait of Hormuz, which has been under Iranian blockade since February, affecting global energy supplies.
Nonetheless, Trump warned that failure by Iran to negotiate a deal would lead to escalated bombing at “a much higher level and intensity.” His remarks came amid a temporary halt to the U.S.-led “Project Freedom” operation, which had been safeguarding shipping routes through the strait. Although Trump paused the operation to potentially finalize a deal with Tehran, he maintained that the port blockade would persist. In response, Iran’s Revolutionary Guards’ Navy promised secure transit through the strait, signaling a shift with the end of U.S. threats and new procedures being introduced, though specifics were not disclosed.
The immediate impact of these developments was a sharp 11% drop in Brent crude oil prices, bringing them down to $97 a barrel, marking the first dip below $100 since late April. Wholesale gas prices also followed this downward trend, with the British June contract falling by 6.3%. The potential easing of tensions bolstered airline stocks, reflecting improved prospects for international travel. The oil price decline accelerated after reports suggested the White House was nearing a one-page memorandum of understanding with Iran to end the conflict, potentially paving the way for detailed nuclear discussions.
Despite this initial optimism, oil prices later regained some ground, trading at $101.83 a barrel after Iran labeled the proposed agreement as an “American wishlist, not a reality.” Iran’s statement, while expressing gratitude to shipowners and captains for adhering to Iranian regulations, did not clarify the nature of the new procedures in place for the strait. The previous week’s oil prices had surged to $126 a barrel, the highest since 2022, amid concerns that the U.S. port blockade could extend for months.
European stock markets responded positively to the potential breakthrough in U.S.-Iran relations. The UK’s FTSE 100 index climbed by 2%, France’s Cac 40 increased by 3%, and Germany’s Dax saw a 2.1% rise. Additionally, global indices reflected this optimism, with MSCI’s All-Country World Index reaching a new record high, alongside significant gains in emerging markets and the Asia Pacific shares index outside Japan, which climbed by 2.5%.