In a significant development, oil prices experienced a decline while stock markets saw a rise following a statement from Donald Trump indicating the potential conclusion of the conflict with Iran. The U.S. President suggested that the Strait of Hormuz could be accessible to all parties if Tehran reached an agreement with Washington. On social media, Trump noted, “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.” However, he also warned of intensified military action if no deal was reached.
Trump’s comments came after he announced a temporary pause in the “Project Freedom” operation, which has involved escorting ships through the Strait of Hormuz. This vital conduit for about one-fifth of the world’s oil supplies has been under blockade by Iran since February, leading to a global energy crisis. While the U.S. operation is on hold for potential negotiations, the blockade of Iranian ports remains in effect. Iran’s Revolutionary Guards’ Navy responded by stating that safe passage through the strait would be ensured, signaling the first reaction from Tehran to the U.S. decision to pause its operations.
The news initially caused Brent crude oil prices to drop 11%, reaching as low as $97 per barrel, marking the first time it fell below $100 since late April. The British June wholesale gas contract also saw a decrease, falling by 6.3% to 107.8p a therm. This shift in oil prices positively impacted airline stocks, as the prospect of international travel improved. The drop in crude prices accelerated after reports suggested that the White House was nearing an agreement with Iran on a one-page memorandum of understanding to end the conflict. This report cited sources including two U.S. officials, indicating groundwork for more detailed nuclear discussions was underway.
Despite the initial drop, oil prices later regained some ground, with Brent crude trading down by 7.3% at $101.83 per barrel. Iran, however, dismissed the U.S. proposal as an “American wishlist [and] not a reality.” Meanwhile, the Revolutionary Guards did not elaborate on the new procedures for the strait but expressed gratitude to shipowners and captains for adhering to Iranian regulations during transit. Previously, oil prices had surged to $126 a barrel last week, reaching their highest level since 2022, amid Trump’s remarks about the U.S. blockade potentially extending for months with stalled peace talks.
European stock markets rallied in response to the latest developments. The UK’s FTSE 100 index rose by 2%, France’s Cac 40 increased by 3%, and Germany’s Dax saw a 2.1% uptick. Additionally, MSCI’s All-Country World Index climbed 1.6% to a new record, alongside similar gains for its emerging markets benchmark and the broadest index of Asia Pacific shares outside Japan, which rose by 2.5%.