In a significant development, oil prices experienced a sharp decline and stock markets saw a rise following President Donald Trump’s announcement that the conflict with Iran might conclude, with the Strait of Hormuz potentially reopening to international passage. Trump conveyed through social media that the resolution of the conflict, dubbed Epic Fury, is contingent upon Iran’s agreement to previously discussed terms. He emphasized that if Iran complies, the blockade affecting the vital waterway, responsible for about 20% of global oil transport, would be lifted, allowing access to all, including Iran. However, Trump warned that failure to reach an agreement would lead to intensified military actions against Iran.
The president’s statement came as he announced a temporary halt to his “Project Freedom” initiative, which involved escorting ships through the strait, amid ongoing tensions. This action followed Iran’s blockade of the Strait of Hormuz since February, which had triggered a global energy crisis. Trump clarified that while the escort operation would pause to facilitate negotiations with Tehran, the blockade of Iranian ports would remain intact. In response, Iran’s Revolutionary Guards’ Navy indicated their commitment to ensuring safe passage through the strait, marking their initial reaction to the U.S. pause in operations.
The announcement had immediate repercussions on the energy market. Brent crude oil, which had surged as much as 6% earlier in the week due to heightened tensions in the Middle East, plummeted by 11% to reach $97 per barrel, marking its first drop below $100 since April 22. Similarly, wholesale gas prices also decreased, with the British June contract falling by 6.3% to 107.8p per therm. Airline stocks benefited from the news, reflecting optimism for improved international travel prospects. The oil price decline was further accelerated by reports suggesting that the White House was nearing a one-page memorandum of understanding with Iran, aiming to lay the groundwork for comprehensive nuclear discussions.
Despite the initial decline, oil prices later rebounded slightly, trading down 7.3% at $101.83 per barrel, as Iran dismissed the proposed agreement as merely an “American wishlist,” not reflective of reality. The Revolutionary Guards’ statement regarding the strait did not specify new procedural details but expressed gratitude towards shipowners and captains for adhering to Iranian regulations while navigating the waterway.
European stock markets responded positively to these developments. The UK’s FTSE 100 index increased by 2%, France’s Cac 40 saw a 3% rise, and Germany’s Dax climbed by 2.1%. The MSCI All-Country World Index also experienced a 1.6% increase, reaching a new record. This performance was mirrored by advances in the emerging markets benchmark and the broadest index of Asia Pacific shares outside Japan, which rose by 2.5%.