In a significant development, oil prices decreased and stock markets experienced an upswing following President Donald Trump’s declaration that the conflict with Iran could conclude if Tehran agreed to a deal with the United States. Trump suggested that the strategic Strait of Hormuz, a critical waterway for global oil supplies, would be accessible to all nations, including Iran, under such an agreement. “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,” Trump stated on social media. However, he cautioned that failure to reach a deal would lead to intensified military action from the U.S.
Trump’s remarks followed his announcement to temporarily halt the “Project Freedom” operation, which involved escorting ships through the Strait of Hormuz. This area, vital for transporting approximately 20% of the world’s oil, has been under Iranian blockade since late February, contributing to a global energy crisis. While pausing the operation to finalize negotiations with Tehran, Trump maintained that the blockade on Iranian ports would persist. In response, Iran’s Revolutionary Guards’ Navy indicated that safe passage through the strait would be secured, signaling Iran’s first reaction to the U.S. pause in operations that aimed to assist stranded vessels.
The news initially caused a sharp decline in Brent crude oil prices, which dropped 11% to $97 per barrel, marking its first dip below $100 since April 22. Simultaneously, wholesale gas prices decreased, with the British June contract falling by 6.3% to 107.8p per therm. The prospect of improved international travel drove airline stocks higher. Earlier reports suggested the White House was nearing a one-page memorandum of understanding with Iran, potentially setting the stage for detailed nuclear discussions. However, oil prices later regained some ground, trading down 7.3% at $101.83 per barrel, after Iran dismissed the U.S. proposal as merely an “American wishlist [and] not a reality.”
European stock markets responded positively, with the UK’s FTSE 100 index increasing by 2%, France’s Cac 40 climbing 3%, and Germany’s Dax rising by 2.1%. Meanwhile, MSCI’s All-Country World Index ascended by 1.6%, reaching a new record, alongside similar achievements for its emerging markets benchmark and the broadest index of Asia Pacific shares outside Japan, which rose by 2.5%. The recent surge in oil prices, which previously peaked at $126 a barrel last week, was attributed to concerns over the prolonged U.S. blockade of Iranian ports and stalled peace negotiations.
The Revolutionary Guards’ statement did not detail the new procedures for ensuring safe transit through the strait but expressed gratitude to shipowners and captains for adhering to Iranian regulations. As the global markets continue to react, the potential for a resolution between the U.S. and Iran remains a focal point for investors and policymakers worldwide.