Oil prices experienced a significant drop and stock markets saw an upswing as President Donald Trump announced a potential end to the hostilities with Iran, contingent upon Tehran agreeing to a deal with Washington. Trump assured that the Strait of Hormuz, a critical maritime passage, would be “open to all” if an agreement could be reached. He took to social media to express that although achieving this agreement might be a substantial assumption, the ongoing conflict, dubbed “Epic Fury,” would cease, and the blockade would permit unrestricted access to the strait, Iran included.
Trump also conveyed a stern warning that if Iran failed to reach a deal, the U.S. would escalate military actions, stating that “the bombing starts” with an intensity surpassing previous levels. His remarks followed the announcement of a temporary halt in the “Project Freedom” operation, which has been escorting ships through the strait since February, when Iran initiated a blockade, leading to a global energy crisis. Despite pausing the naval operation, Trump emphasized that the blockade on Iranian ports would persist. In response, Iran’s Revolutionary Guards’ Navy assured safe passage through the strait, indicating a readiness for new procedures following the U.S. pause in operations.
The initial reaction to Trump’s statements saw Brent crude oil prices plummet by 11% to $97 a barrel, marking the first time since April that prices had dipped below $100. This decline followed a surge earlier in the week due to Middle East tensions. Wholesale gas prices also fell, with the British June contract dropping 6.3% to 107.8p a therm. The potential for an agreement that could ease international travel restrictions bolstered airline stocks. The oil market’s decline accelerated after reports suggested that the White House was nearing a one-page memorandum of understanding with Iran, setting the stage for comprehensive nuclear talks. However, Iran later dismissed the notion as merely “an American wishlist [and] not a reality,” leading oil prices to partially recover, closing down 7.3% at $101.83 a barrel.
The Revolutionary Guards’ statement, while not detailing the new procedures for the strait, expressed gratitude to shipowners and captains for adhering to Iranian regulations during their transits. The oil market had previously surged to $126 a barrel, its highest since 2022, when Trump indicated that the blockade of Iranian ports could extend for several months amid stalled peace negotiations.
European stock markets responded positively to the developments, with the UK’s FTSE 100 index rising 2%, France’s Cac 40 increasing by 3%, and Germany’s Dax climbing 2.1%. The MSCI’s All-Country World Index surged by 1.6% to a new record, alongside significant gains in its emerging markets benchmark and the broad Asia Pacific shares index outside Japan, which rose by 2.5%.