In a significant development, oil prices dropped and stock markets surged following President Donald Trump’s announcement that a deal with Iran could lead to the end of hostilities and the reopening of the Strait of Hormuz. Trump took to social media to express optimism about the potential agreement, stating, “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 that without a deal, military actions would escalate significantly.
The president’s comments came amid a pause in the “Project Freedom” operation, which was designed to escort ships through the strategically vital strait. This waterway, responsible for carrying about 20% of the world’s oil supplies, has been under an Iranian blockade since February, causing a global energy crisis. Trump indicated that the operation’s suspension would be temporary, aimed at facilitating negotiations with Tehran, although the blockade of Iranian ports would persist. In response, Iran’s Revolutionary Guards’ Navy assured safe passage through the strait, marking their first reaction to the U.S. decision to halt operations.
The impact on the oil market was immediate, with Brent crude falling by 11% to $97 a barrel, the first dip below $100 since April. The decline in oil prices also led to a decrease in wholesale gas prices, with the British June contract dropping by 6.3% to 107.8p a therm. Concurrently, airline stocks benefitted from the prospect of improved international travel. Earlier in the day, crude prices had already been on a downward trend, which accelerated after reports suggested that the U.S. and Iran were close to agreeing on a memorandum of understanding to end the conflict.
Despite these developments, oil prices partially recovered, trading at $101.83 a barrel, as Iran dismissed the negotiations as an “American wishlist” rather than a reality. The Revolutionary Guards’ statement did not detail the new procedures but acknowledged the cooperation of shipowners and captains in adhering to Iranian regulations in the strait.
European stock markets experienced a rally, with the UK’s FTSE 100 index rising by 2%, France’s Cac 40 increasing by 3%, and Germany’s Dax climbing 2.1%. Similarly, MSCI’s All-Country World Index achieved a new record, gaining 1.6%, alongside milestones for its emerging markets benchmark and the broadest index of Asia Pacific shares outside Japan, which rose by 2.5%.