Oil prices dropped and stock markets surged following President Donald Trump’s announcement that the conflict with Iran could end if Tehran agreed to a deal with Washington. Trump stated that the Strait of Hormuz would be “open to all” under such an agreement. He shared on social media, “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.” However, he warned that if no deal materialized, “the bombing starts” and would escalate to a higher intensity than before.
Trump’s remarks came after he announced a temporary pause in the “Project Freedom” operation, which involved escorting ships through the vital Strait of Hormuz, a key channel for approximately 20% of the world’s oil. This strait has been blockaded by Iran since late February, leading to a global energy crisis. The president noted that the operation would be halted “for a short period” to finalize negotiations with Tehran, though the blockade on Iranian ports would continue. Iran’s Revolutionary Guards’ Navy, in its first response, stated that US threats would cease, and new transit procedures would be implemented, ensuring safe passage through the strait.
The initial news led to a sharp decline in Brent crude oil prices, which plummeted 11% to $97 a barrel, marking the first dip below $100 since April 22. The drop followed a significant rise earlier in the week due to renewed tensions in the Middle East. Meanwhile, wholesale gas prices also fell, with the British June contract decreasing by 6.3% to 107.8p a therm, and airline stocks enjoyed a boost due to improved prospects for international travel. The Axios news site reported that the White House was nearing a one-page memorandum of understanding with Iran to conclude the war, based on information from multiple sources, including two US officials.
Despite the initial decline, oil prices later recovered some losses, trading down 7.3% at $101.83 a barrel after Iran dismissed the US proposal as an “American wishlist [and] not a reality.” The statement from Iran’s Revolutionary Guards about the strait did not provide details on the new procedures but acknowledged the cooperation of shipowners and captains in adhering to Iranian regulations during transit.
As a result of these developments, European stock markets experienced a rally. The UK’s FTSE 100 index rose by 2%, France’s Cac 40 increased by 3%, and Germany’s Dax climbed by 2.1%. Additionally, MSCI’s All-Country World Index reached a new record, alongside similar gains for its emerging markets benchmark and the broadest index of Asia Pacific shares outside Japan, which rose by 2.5%.