In a significant development, oil prices dropped and stock markets surged following President Donald Trump’s announcement that the conflict with Iran could conclude, and the Strait of Hormuz might be accessible to all if Tehran reaches an agreement with Washington. Trump’s message on social media indicated that should Iran comply with previously agreed terms, the operation known as Epic Fury would cease, and the blockade would be lifted, allowing free passage through the crucial waterway, including for Iran. Nonetheless, he warned that failure to reach a deal would result in intensified bombing.
The announcement comes amid a pause in the US-led “Project Freedom,” which has been escorting ships through the Strait of Hormuz. This waterway is vital, as it handles approximately 20% of the world’s oil supplies and has been under an Iranian blockade since late February, causing a global energy crisis. Despite the pause, Trump stated that the blockade of Iranian ports would persist. In response, Iran’s Revolutionary Guards’ Navy assured safe passage through the strait, citing the end of US threats and the introduction of new procedures.
The news initially sent Brent crude oil prices tumbling 11%, dropping to $97 a barrel, marking the first time since April 22 that prices fell below $100. The decline follows a peak of $126 per barrel last week. Wholesale gas prices also decreased, with the British June contract falling by 6.3% to 107.8p a therm. The prospect of improved international travel also buoyed airline stocks. The decline in oil prices accelerated after a report suggested that the White House was nearing a memorandum of understanding with Iran to end the conflict, potentially setting a framework for detailed nuclear discussions.
However, oil prices later recovered some losses, settling at $101.83 a barrel, a 7.3% drop, after Iran dismissed the US proposal as an “American wishlist, not a reality.” The Guards’ statement did not elaborate on the new procedures but expressed gratitude toward shipowners and captains for adhering to Iranian regulations in the strait.
European stock markets experienced a rally on the back of these developments. The UK’s FTSE 100 index saw a 2% increase, while France’s Cac 40 climbed 3%, and Germany’s Dax rose by 2.1%. Additionally, MSCI’s All-Country World Index gained 1.6%, reaching a new record, alongside similar gains for its emerging markets and Asia Pacific shares benchmarks, excluding Japan, which saw a 2.5% rise.