In a significant development, oil prices dropped while stock markets climbed following U.S. President Donald Trump’s announcement that the conflict with Iran could potentially cease if Tehran agrees to a deal with Washington. Trump took to social media to express that the longstanding “Epic Fury” could conclude if Iran complies with agreed terms, allowing the Strait of Hormuz to remain accessible to all, including Iran. However, he warned that should Iran fail to reach an agreement, military actions would resume with heightened intensity.
The current pause in the U.S. President’s “Project Freedom” operation, which involves escorting ships through the strategically crucial Strait of Hormuz, was announced as Trump seeks to finalize negotiations with Tehran. This strait, which is responsible for transporting around 20% of the world’s oil supply, has been under blockade by Iran since late February, leading to a global energy crisis. Despite the pause, Trump confirmed that the blockade on Iranian ports would persist. In response, the Revolutionary Guards’ Navy stated that safe passage through the strait would be assured with the cessation of U.S. threats and implementation of new procedures, marking Iran’s initial response to the U.S.’s temporary halt.
The announcement caused Brent crude oil prices to plunge by 11%, reaching as low as $97 per barrel, marking its first dip below $100 since April 22. Similarly, wholesale gas prices decreased, with the British June contract dropping 6.3% to 107.8p a therm, while airline stocks benefited from the prospect of improved international travel conditions. Earlier in the day, oil prices had already been in decline, but this trend intensified following reports that the White House was nearing a memorandum of understanding to end hostilities with Iran, setting the stage for detailed nuclear discussions.
Despite the initial drop, oil prices later rebounded slightly, trading down 7.3% at $101.83 per barrel, after Iranian officials dismissed the potential agreement as merely an “American wishlist.” Meanwhile, the statement from the Revolutionary Guards regarding the strait did not elaborate on the new procedures but expressed appreciation to shipowners and captains for adhering to Iranian regulations when traversing the waterway.
European stock markets saw a positive reaction, with the UK’s FTSE 100 index, France’s Cac 40, and Germany’s Dax experiencing gains of 2%, 3%, and 2.1% respectively. Furthermore, MSCI’s All-Country World Index marked a new record by rising 1.6%, alongside similar milestones for its emerging markets benchmark and its broadest index of Asia Pacific shares outside Japan, which increased by 2.5%.
