Oil prices saw a significant drop while stock markets posted gains following President Donald Trump’s announcement that the conflict with Iran could come to an end if Tehran agrees to a deal with Washington. Trump conveyed through social media that assuming Iran complies with the agreed terms, the conflict known as “Epic Fury” would conclude, and the Strait of Hormuz would be reopened to all, including Iran. However, he warned that failure to reach an agreement would lead to intensified bombings.
The statement came in the wake of Trump pausing the “Project Freedom” operation, which involved escorting ships through the strategic Strait of Hormuz. This waterway, crucial for about 20% of global oil supply, has been under an Iranian blockade since February, contributing to a global energy crisis. Although the operation was halted temporarily to facilitate negotiations with Iran, the blockade of Iranian ports remains in effect. In response, Iran’s Revolutionary Guards’ Navy indicated that safe passage through the strait would be assured as US threats diminish and new procedures are established.
As word of potential diplomatic progress emerged, Brent crude oil prices, which had surged by 6% earlier in the week due to Middle Eastern tensions, plummeted by 11% to $97 a barrel, marking its first dip below $100 since April 22. Wholesale gas prices also decreased, with the British June contract dropping 6.3% to 107.8p per therm. The prospect of eased tensions buoyed airline stocks, reflecting an improved outlook for international travel. Meanwhile, reports suggested that the White House was nearing a one-page memorandum of understanding with Iran, setting the stage for detailed nuclear discussions, according to sources familiar with the matter.
Later in the day, oil prices rebounded somewhat, settling at $101.83 a barrel, down 7.3%, as Iran dismissed the US proposal as an “American wishlist” rather than a feasible plan. The Revolutionary Guards did not elaborate on the new procedures for the strait but expressed gratitude towards shipowners and captains for adhering to Iranian regulations.
Amid these developments, European stock markets experienced a rally. The UK’s FTSE 100 index climbed by 2%, France’s Cac 40 rose by 3%, and Germany’s Dax increased by 2.1%. The MSCI’s All-Country World Index also reached a new record, advancing 1.6%, alongside milestones for its emerging markets benchmark and the broad Asia Pacific index, excluding Japan, which saw a 2.5% rise.