Oil prices saw a decline while stock markets experienced a rise following statements from Donald Trump indicating a potential end to the conflict with Iran and the reopening of the Strait of Hormuz, contingent on Tehran reaching an agreement with Washington. The U.S. president took to social media to express optimism: “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.” Despite this, Trump warned that failure to reach a deal would lead to intensified military action.
These developments came on the heels of Trump’s announcement to temporarily pause “Project Freedom,” an initiative aimed at providing safe passage for ships through the strategically vital strait, which accounts for about 20% of the world’s oil supply. This move followed Iran’s blockade of the strait since late February, which has contributed to a global energy crisis. Although the operation is paused, Trump asserted that the blockade of Iranian ports would continue. In response, Iran’s Revolutionary Guards’ Navy stated that safe transit would be ensured with the cessation of U.S. threats and the implementation of new procedures, marking Tehran’s initial response to the pause.
The announcement initially led to a significant drop in Brent crude oil prices, which fell by 11% to $97 per barrel, marking the first time prices dipped below $100 since late April. Similarly, wholesale gas prices decreased, with the British June contract dropping by 6.3% to 107.8p a therm. The anticipation of improved international travel conditions also spurred an increase in airline stocks. Earlier, oil prices had been declining, a trend that accelerated following reports suggesting that the White House was nearing an agreement with Iran on a memorandum of understanding to conclude the conflict. Sources indicated that both parties were prepared to outline a framework for future nuclear discussions.
However, later in the day, oil prices moderated their losses, trading down by 7.3% at $101.83 a barrel, as Iranian officials dismissed the potential agreement as an “American wishlist [and] not a reality.” The statement from Iran’s Revolutionary Guards did not clarify the specifics of the new procedures but expressed gratitude to shipowners and captains for adhering to Iranian regulations in the waterway.
In the wake of these developments, European stock markets showed positive movement. The UK’s FTSE 100 index increased by 2%, France’s Cac 40 saw a 3% rise, and Germany’s Dax gained 2.1%. Meanwhile, MSCI’s All-Country World Index climbed 1.6% to reach a new record, reflecting similar gains in its emerging markets benchmark and the broadest index of Asia Pacific shares outside Japan, which rose by 2.5%.