In a significant development, oil prices experienced a decline while stock markets surged following President Donald Trump’s announcement regarding the potential end of hostilities with Iran. Trump stated that the Strait of Hormuz, a critical chokepoint for global oil supplies, would be accessible to all, including Iran, contingent upon Tehran reaching an agreement with Washington. On social media, Trump expressed optimism about concluding the conflict, but cautioned that without a deal, military actions would escalate to unprecedented levels.
Trump’s comments came in the wake of his decision to momentarily halt “Project Freedom,” a U.S. operation that has been escorting ships through the Strait of Hormuz. This waterway, responsible for a significant portion of the world’s oil transport, has been under blockade by Iran since February, exacerbating a global energy crisis. Despite this pause, Trump affirmed that the blockade of Iranian ports would persist. Iran’s Revolutionary Guards’ Navy responded by pledging to ensure safe passage through the strait, marking their first reaction to the U.S. suspension of operations aimed at aiding stranded vessels.
The news led to an immediate drop in Brent crude oil prices, which had surged by as much as 6% earlier in the week due to Middle East tensions. Crude prices fell 11%, reaching $97 per barrel, their lowest since April 22. Meanwhile, wholesale gas prices also decreased, with the British June contract falling by 6.3%. The potential for resumed international travel boosted airline stocks. Reports suggested that the White House was nearing a memorandum of understanding to end the conflict, aiming to establish a framework for future nuclear negotiations.
Despite the initial drop, oil prices partially rebounded later, trading down 7.3% at $101.83 per barrel after Iran dismissed the proposed agreement as merely an “American wishlist.” The Guards’ statement did not detail the new procedures for the strait but acknowledged the cooperation of shipowners and captains with Iranian regulations.
European stock markets responded positively to these developments, with the UK’s FTSE 100 index increasing by 2%, France’s Cac 40 climbing 3%, and Germany’s Dax rising by 2.1%. Additionally, MSCI’s All-Country World Index achieved a new high, along with gains in its emerging markets benchmark and its broad index of Asia Pacific shares outside Japan, which rose by 2.5%.