Global oil prices experienced a decline while stock markets surged after President Donald Trump announced the potential resolution of conflict with Iran and promised that the Strait of Hormuz would remain accessible if Tehran agrees to a deal with Washington. Trump, in a social media message, indicated that if Iran fulfills its part of the agreement, the conflict known as Epic Fury would conclude, and the longstanding blockade would be lifted, ensuring open access to the strategically vital waterway for all nations, including Iran.
However, Trump warned of increased military action if Iran failed to negotiate, stating that bombing would resume with greater intensity. This statement followed his announcement of a temporary halt to “Project Freedom,” a mission tasked with protecting vessels navigating the Strait of Hormuz. The strait, which has been under Iranian blockade since February, is a crucial passage for about 20% of the world’s oil, and its closure has contributed to a global energy crisis. Trump emphasized that while the escort operation would pause to facilitate negotiations, the blockade on Iranian ports would persist.
The Iranian Revolutionary Guards responded to the U.S. pause in operations by assuring safe passage through the strait, suggesting that new procedures would be implemented following the de-escalation of U.S. threats. This marked Iran’s initial response to the potential easing of tensions. As the news unfolded, Brent crude oil prices, which had surged by 6% earlier in the week following attacks in the Middle East, plummeted by 11%, falling to $97 per barrel for the first time since April 22.
In tandem, wholesale gas prices dropped, with the British June contract decreasing by 6.3% to 107.8p per therm, and airline stocks rose, reflecting optimism for international travel. The decline in oil prices accelerated after reports suggested that the White House was nearing a preliminary memorandum of understanding to resolve the conflict with Iran, setting the stage for future nuclear discussions. Nevertheless, oil prices rebounded slightly later, with Iran dismissing the notion of an agreement as merely an “American wishlist.” As oil prices stabilized at $101.83 per barrel, the Revolutionary Guards expressed gratitude to shipowners and captains for adhering to Iranian regulations in the strait.
European stock markets experienced a rally on the back of these developments, with the UK’s FTSE 100 index increasing by 2%, France’s Cac 40 by 3%, and Germany’s Dax by 2.1%. Similarly, the MSCI All-Country World Index climbed 1.6% to a record high, accompanied by gains in its emerging markets benchmark and the broadest index of Asia Pacific shares outside Japan, which rose by 2.5%. This positive momentum reflects the global financial markets’ response to the potential resolution of tensions in the Middle East and the prospect of more stable energy supplies.