In a significant development, oil prices witnessed a decline while stock markets saw an upswing following comments by U.S. President Donald Trump regarding the potential resolution of the conflict with Iran. Trump suggested that the ongoing strife could conclude and that the strategically crucial Strait of Hormuz would be accessible to all nations if Tehran agreed to a deal with Washington. Posting on social media, Trump remarked, “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.”
Despite this optimistic outlook, Trump issued a stark warning that failure to reach a deal would lead to intensified military actions, stating, “the bombing starts” and it would escalate beyond previous levels. This statement followed his decision to temporarily halt “Project Freedom,” an operation aimed at escorting ships through the Strait of Hormuz, a critical channel for about 20% of the world’s oil supply. Iran has maintained a blockade on this channel since late February, contributing to a global energy crisis. The pause in operations was intended to facilitate finalizing an agreement with Tehran, although Trump confirmed that the blockade of Iranian ports would persist.
Iran’s Revolutionary Guards’ Navy responded to the U.S. pause in operations, indicating that safe passage through the strait would be assured if U.S. threats ceased, alongside the introduction of unspecified new procedures. This reaction marked Iran’s first official comment concerning the U.S. decision to suspend operations aimed at aiding ships stranded in the region. Initially, the market responded to these developments with Brent crude oil prices plunging by 11% to $97 a barrel, marking the first dip below $100 since April. Wholesale gas prices also took a hit, with the British June contract dropping by 6.3%.
The initial decline in oil prices coincided with a report suggesting that the White House was close to finalizing a one-page memorandum of understanding to end hostilities with Iran. The report indicated that both parties were preparing to establish a framework for more comprehensive nuclear discussions. Despite the initial optimism, oil prices partially recovered later in the day, closing down 7.3% at $101.83 a barrel after Iran dismissed the deal as an “American wishlist [and] not a reality.”
European stock markets responded positively to these developments, with notable increases across major indices. The UK’s FTSE 100 index rose by 2%, while France’s Cac 40 and Germany’s Dax saw gains of 3% and 2.1%, respectively. On a broader scale, MSCI’s All-Country World Index reached a new peak with a 1.6% rise, alongside similar achievements for its emerging markets benchmark and its comprehensive index of Asia Pacific shares outside Japan, which climbed by 2.5%.
