Global oil prices experienced a significant decline while stock markets saw a rise following President Donald Trump’s announcement hinting at a potential end to the conflict with Iran. Trump indicated that the strategic Strait of Hormuz could be accessible to all, including Iran, if a deal with Washington was reached. Through social media, he expressed optimism that the “already legendary Epic Fury” would conclude, provided Iran adhered to previously agreed terms—a prospect he admitted was uncertain. Nonetheless, he warned that a failure to reach an agreement would result in escalated military actions against Iran.
Trump’s comments coincided with his decision to temporarily halt “Project Freedom,” a naval operation intended to escort vessels through the Hormuz Strait, which is critical as it handles approximately 20% of the world’s oil shipments. Iran had blockaded the strait since February, leading to a global energy crisis. Although the operation is paused to facilitate negotiations with Tehran, Trump emphasized that the blockade of Iranian ports would continue. In response, the Iranian Revolutionary Guards’ Navy pledged to ensure safe passage through the strait, marking their first response to the U.S. move to suspend operations that were aiding stranded ships.
The immediate impact of this development was felt in the commodities market, with Brent crude oil prices dropping sharply by 11% to $97 per barrel, marking the first instance of prices falling below $100 since late April. The decline in oil prices was accompanied by a 6.3% decrease in British wholesale gas prices, while airline stocks rose due to improved travel prospects. This downward trend in oil prices accelerated after reports suggested that the White House was nearing a memorandum of understanding with Iran to end hostilities, potentially setting the stage for further nuclear discussions.
Despite the initial plunge, oil prices trimmed their losses later, trading down 7.3% at $101.83 a barrel. This adjustment followed Iran’s dismissal of the U.S. proposal as an “American wishlist” rather than a viable agreement. The Revolutionary Guards’ statement did not elaborate on new procedural changes but commended shipowners and captains for adhering to Iranian regulations when navigating the waterway.
The political developments sparked a rally in European stock markets, with the UK’s FTSE 100 index climbing 2%, France’s Cac 40 rising by 3%, and Germany’s Dax increasing by 2.1%. Similarly, MSCI’s All-Country World Index achieved a record high with a 1.6% increase, reflecting a positive response across its emerging markets benchmark and the broadest index of Asia Pacific shares outside Japan, which surged by 2.5%.