Oil prices declined and stock markets experienced an upswing following a statement from Donald Trump suggesting that the conflict with Iran might conclude with an agreement, potentially reopening the Strait of Hormuz to international passage. Trump mentioned via social media that should Iran adhere to prior commitments, the ongoing crisis, referred to as “Epic Fury,” would cease, and the blockade enabling the strait’s reopening would include access for Iran. However, he cautioned that failure to reach a deal would result in heightened military actions.
The announcement came after President Trump indicated a temporary halt to the “Project Freedom” mission, which has been escorting vessels through the strategically significant Strait of Hormuz. This waterway, crucial for around 20% of the world’s oil, has faced an Iranian blockade since February, exacerbating a global energy crisis. Trump’s decision to pause the operation aims to facilitate negotiations with Tehran, while the blockade on Iranian ports remains in effect. Iran’s Revolutionary Guards’ Navy responded by affirming secure passage through the strait, marking their first acknowledgment of the U.S. operational pause.
The initial impact of the news saw Brent crude prices plummet by 11%, dropping to $97 per barrel, marking the first dip below $100 since April 22. Concurrently, wholesale gas prices decreased, with the British June contract seeing a 6.3% reduction. Positive prospects for international travel boosted airline stocks. Reports suggested that the White House was nearing a one-page memorandum of understanding with Iran, potentially setting the stage for detailed nuclear discussions. This development further accelerated the decline in oil prices, which later adjusted to a 7.3% reduction, settling at $101.83 per barrel as Iran dismissed the memorandum as unrealistic.
Despite the fluctuating oil prices, European stock markets displayed significant gains. The FTSE 100 index in the UK climbed by 2%, while France’s Cac 40 and Germany’s Dax increased by 3% and 2.1%, respectively. On a broader scale, MSCI’s All-Country World Index achieved a new record with a 1.6% rise, mirrored by similar advances in its emerging markets benchmark and the Asia Pacific shares index outside Japan, which rose by 2.5%.
The Guards’ brief statement did not elaborate on the new procedures for the strait but expressed gratitude towards shipowners and captains for adhering to Iranian regulations. The oil price had previously surged to $126 a barrel last week, a peak not seen since 2022, following Trump’s comments on the potential duration of the U.S. blockade and the stagnation of peace negotiations.