Oil prices experienced a significant drop, while stock markets saw an upswing following a statement from Donald Trump regarding the potential conclusion of hostilities with Iran. The U.S. President announced that the Strait of Hormuz would be accessible to all, contingent upon Tehran’s agreement to a deal with Washington. Trump stated via social media that if Iran complies with previously agreed terms, “the already legendary Epic Fury will be at an end,” allowing for open access to the Strait of Hormuz, a critical maritime route for global oil supply.
Trump emphasized that the possibility of a deal with Iran is uncertain. He warned that failure to reach an agreement would result in the resumption of military actions, threatening a level of intensity surpassing previous engagements. This development follows Trump’s decision to temporarily halt the “Project Freedom” operation, which involved escorting ships through the strait. The waterway, responsible for about 20% of the world’s oil shipments, has been under Iranian blockade since late February, contributing to a worldwide energy crisis.
The announcement led to a sharp decline in Brent crude oil prices, which plummeted by 11% to $97 per barrel, the first time dipping below $100 since April 22. In parallel, wholesale gas prices also decreased, with the British June contract dropping by 6.3% to 107.8p per therm. The market response was bolstered by reports suggesting that the White House was nearing a one-page memorandum of understanding to end the conflict with Iran, paving the way for potential nuclear negotiations.
Despite the initial market reaction, oil prices recovered slightly, closing with a 7.3% decline at $101.83 per barrel, as Iranian officials dismissed the prospect of an agreement as an “American wishlist.” The Revolutionary Guards’ Navy, in response to the U.S. pausing its escort operations, pledged to ensure safe passage through the strait, though it did not elaborate on the specific measures to be implemented. The acknowledgment from Iran marked its first direct response to the U.S.’s strategic pause aimed at assisting stranded vessels.
In the wake of these developments, European stock markets rallied, with the UK’s FTSE 100 index gaining 2%, France’s Cac 40 rising by 3%, and Germany’s Dax increasing by 2.1%. Additionally, MSCI’s All-Country World Index reached a new peak, advancing by 1.6%, alongside gains in emerging markets and Asia Pacific shares outside Japan, which saw a 2.5% rise. These movements reflect the broader optimism in financial markets as diplomatic channels between the U.S. and Iran show signs of potential thawing.