In a significant development, oil prices saw a decline while stock markets experienced an uptick following statements from Donald Trump suggesting that the conflict with Iran might be nearing its conclusion. The U.S. President indicated that the Strait of Hormuz would be accessible to everyone if a deal were reached with Tehran. Trump shared via social media that if Iran complies with the terms already agreed upon, there would be an end to the conflict he referred to as “Epic Fury,” and the existing blockade would be adjusted to permit all, including Iran, to navigate the crucial waterway. However, he cautioned that failure to reach an agreement would result in an escalation of bombing at an unprecedented level of intensity.
These comments came amid Trump’s decision to temporarily halt the “Project Freedom” operation, which involved escorting vessels through the Strait of Hormuz. This narrow passageway is pivotal, handling about 20% of the world’s oil supply, and had been blockaded by Iran since late February, causing a global energy crisis. Trump emphasized that the pause was to facilitate finalizing a deal with Tehran, although the blockade of Iranian ports would persist. In response, the Iranian Revolutionary Guards’ Navy assured that safe passage through the strait would be maintained, noting the end of U.S. threats and the implementation of new procedures. This marked Iran’s initial response to the U.S. pausing operations intended for the safe passage of stranded ships.
The announcement initially caused Brent crude oil prices, which had surged by 6% earlier due to Middle Eastern tensions, to plummet by 11% to $97 a barrel, marking the first drop below $100 since April 22. Similarly, wholesale gas prices saw a reduction, with the British June contract decreasing by 6.3% to 107.8p per therm. The airline industry benefited from the prospect of improved international travel, as evidenced by rising airline stocks. The decline in crude prices accelerated after reports surfaced that the White House was nearing a one-page memorandum of understanding with Iran to potentially end the conflict, suggesting a framework for more comprehensive nuclear discussions. However, oil prices later rebounded slightly, trading at $101.83 a barrel, as Iran dismissed the proposal as merely an “American wishlist.”
The statement from the Iranian Guards regarding the Strait of Hormuz did not specify the nature of the new procedures, but it acknowledged the cooperation of shipowners and captains adhering to Iranian regulations while navigating the region. Previously, oil prices had peaked at $126 a barrel the previous week, the highest since 2022, following Trump’s indication that the U.S. blockade could extend for months amid stalled peace negotiations.
European stock markets witnessed a rally on the same day. In the UK, the FTSE 100 index climbed by 2%, while France’s Cac 40 rose by 3%, and Germany’s Dax increased by 2.1%. MSCI’s All-Country World Index achieved a new record, increasing by 1.6%, accompanied by similar records for its emerging markets benchmark and its broad Asia Pacific shares index outside Japan, which rose by 2.5%.
