In a significant turn of events, oil prices dropped while stock markets experienced an upswing following U.S. President Donald Trump’s statement suggesting a potential resolution to the conflict with Iran. Trump indicated that the strategic Strait of Hormuz would be accessible to all nations if Tehran reached an agreement with Washington. He conveyed this on social media, remarking that if Iran consents to the pre-agreed terms—a substantial assumption—the ongoing conflict dubbed “Epic Fury” would conclude, allowing the effective blockade to open the Strait of Hormuz to all, including Iran.
Despite expressing optimism about the possibility of a deal, Trump warned that if Iran failed to comply, military actions would escalate to greater levels than before. This announcement followed his decision to temporarily halt the “Project Freedom” operation, which involved escorting ships through the strait, a crucial passage for about 20% of the world’s oil supply. The operation was initially launched in response to Iran’s blockade of the strait in late February, which had sparked a global energy crisis. Although Trump’s escort operations were paused, his blockade of Iranian ports remains active.
Following Trump’s announcement, Iran’s Revolutionary Guards’ Navy responded by ensuring safe passage through the strait, asserting that U.S. threats were diminishing and new procedures were being established. This was Iran’s first official response to the U.S. decision to pause the operations meant to aid stranded vessels. As a result, Brent crude oil prices, which had surged earlier in the week due to tensions in the Middle East, dropped 11% to $97 per barrel, marking the first time prices fell below $100 since April 22.
The developments also influenced the financial markets, with wholesale gas prices decreasing and airline stocks rising due to improved prospects for international travel. The oil price decline accelerated upon reports that the White House was nearing a memorandum of understanding with Iran to end the conflict, as suggested by four sources, including two U.S. officials. However, crude prices partially recovered later, trading down 7.3% at $101.83 per barrel after Iran dismissed the deal as an “American wishlist, not a reality.”
European stock markets experienced a rally, with the FTSE 100 in the UK rising 2%, France’s Cac 40 climbing 3%, and Germany’s Dax increasing by 2.1%. Additionally, MSCI’s All-Country World Index reached a new record, along with its emerging markets benchmark and the broadest index of Asia Pacific shares outside Japan, which rose by 2.5%. These market shifts came after oil prices had reached a high of $126 per barrel the previous week amid fears that the U.S. blockade of Iranian ports could extend for months, with peace talks stalled at that time.