In a significant development, oil prices dropped and stock markets surged following President Donald Trump’s declaration that the conflict with Iran could soon conclude, potentially reopening the Strait of Hormuz. Trump indicated that this outcome hinges on Iran agreeing to terms previously discussed with Washington. “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,” he stated on social media. He also warned that without a deal, military actions would escalate severely.
Trump’s remarks came in conjunction with a temporary halt in the “Project Freedom” operation, which involved escorting ships through the strategically crucial Strait of Hormuz. Since late February, Iran’s blockade of the strait has contributed to a global energy crisis as it is a vital channel for about 20% of the world’s oil supply. The president clarified that while the escort operation would pause briefly to facilitate negotiations with Iran, the blockade on Iranian ports would persist. In response, the Revolutionary Guards’ Navy acknowledged the US’s pause and assured that transit through the strait would be secure, although details of the new measures remain unspecified.
As this news unfolded, the price of Brent crude oil, which had climbed by 6% earlier in the week due to recent Middle Eastern conflicts, plummeted by 11%, reaching $97 per barrel, marking its first dip below $100 since April 22. Wholesale gas prices also saw a decrease, with the British June contract falling 6.3% to 107.8p a therm. The prospect of eased tensions and improved international travel lifted airline stocks. The oil price decline was spurred by reports that the White House was nearing a memorandum of understanding with Iran to end the hostilities, aimed at laying the groundwork for detailed nuclear discussions.
Despite the initial drop, oil prices partially rebounded later in the day, settling at $101.83 per barrel, a 7.3% decrease, as Iran dismissed the US’s optimism as an “American wishlist [and] not a reality.” During the previous week, oil prices had soared to $126 per barrel, their highest since 2022, driven by concerns over the prolonged US blockade of Iranian ports and stalled peace negotiations.
European stock markets experienced a rally as optimism over potential peace talks increased. The UK’s FTSE 100 index rose by 2%, France’s Cac 40 gained 3%, and Germany’s Dax climbed 2.1%. Globally, the MSCI All-Country World Index set a new record with a 1.6% rise, accompanied by similar achievements in its emerging markets benchmark and the broad Asia Pacific shares index outside Japan, which advanced by 2.5%.