Oil prices witnessed a decline and stock markets surged following President Donald Trump’s announcement that the conflict with Iran could conclude, and the Strait of Hormuz would remain accessible if Tehran reached an agreement with Washington. The President conveyed via social media that assuming Iran fulfills its purported commitments, the conflict, dubbed “Epic Fury,” would end. Consequently, the strategic blockade, which had restricted access, would open the Strait of Hormuz to all vessels, including those from Iran. However, Trump issued a stern warning that failure on Iran’s part to negotiate a deal would result in intensified military actions.
The announcement followed Trump’s decision to temporarily halt his “Project Freedom” initiative, which involved escorting ships through the Strait of Hormuz, a critical channel for about 20% of global oil shipments. This measure had been in place since Iran’s blockade in late February, which instigated a global energy crisis. Trump assured that this pause would be brief to facilitate deal negotiations, although the blockade of Iranian ports would persist. In response, Iran’s Revolutionary Guards’ Navy expressed confidence that safe passage through the strait would be ensured with the cessation of U.S. threats and the introduction of new protocols. This marked Iran’s initial response to the U.S. decision to pause operations aimed at assisting stranded vessels.
The news initially sent Brent crude oil prices plummeting by 11% to $97 a barrel, marking the first drop below $100 since April 22, after having spiked by 6% earlier in the week due to Middle East tensions. Wholesale gas prices also decreased, with the British June contract slipping by 6.3% to 107.8p a therm, while airline stocks gained amid prospects of improved international travel. The decline in crude prices accelerated following reports that the U.S. and Iran were nearing a one-page memorandum to end the hostilities, potentially laying the groundwork for more detailed nuclear negotiations.
Despite the initial drop, oil prices partially recovered, trading down 7.3% at $101.83 a barrel as Iran dismissed the negotiations as an “American wishlist” rather than a concrete reality. The Revolutionary Guards’ statement did not elaborate on the newly proposed procedures but acknowledged the cooperation of shipowners and captains adhering to Iranian regulations in the waterway.
Meanwhile, European stock markets experienced a rally, with the UK’s FTSE 100 index climbing by 2%, France’s CAC 40 increasing by 3%, and Germany’s DAX rising by 2.1%. MSCI’s All-Country World Index achieved a new record, advancing 1.6%, along with similar milestones for its emerging markets benchmark and its broadest index of Asia Pacific shares outside Japan, which rose by 2.5%.