In a notable shift, oil prices dropped and stock markets climbed following President Donald Trump’s assertion that the conflict with Iran could conclude and the Strait of Hormuz would be accessible to all if Tehran reached an agreement with Washington. This announcement came as Trump took to social media, expressing that if Iran fulfills its end of the bargain, the ongoing operation “Epic Fury” would cease, allowing the strait to be open to international passage, including Iranian vessels. He cautioned, however, that failure to reach a deal would result in intensified military actions.
The backdrop to this development includes Trump’s decision to temporarily halt “Project Freedom,” a military operation designed to escort vessels through the critical maritime route. The Strait of Hormuz, a vital channel for about 20% of the world’s oil supply, has been under an Iranian blockade since February, causing significant disruptions in global energy markets. Despite the pause in operations, Trump emphasized that the blockade of Iranian ports would persist as negotiations with Tehran continue. In response, Iran’s Revolutionary Guards’ Navy indicated that the strait would be secure under new measures, marking their initial reaction to the US’s temporary cessation of escorting ships.
The news had an immediate impact on global markets. Brent crude oil prices, which had surged earlier in the week due to heightened tensions in the Middle East, plunged by 11% to $97 a barrel, marking its first dip below $100 since April. Wholesale gas prices also saw declines, with the British June contract dropping 6.3%. Meanwhile, airline stocks experienced a boost in anticipation of improved international travel conditions. Reports suggested that the White House was nearing a preliminary agreement with Iran, a sentiment that contributed to the market’s optimism. However, oil prices later rebounded slightly to $101.83 a barrel after Iran dismissed the potential agreement as merely an “American wishlist.”
Despite the lack of detailed information on the new procedures for the Strait of Hormuz, the Iranian statement expressed gratitude to shipowners and captains for adhering to their regulations. Last week, oil prices had peaked at $126 a barrel, the highest since 2022, amid concerns that the US blockade could extend for months and diplomatic efforts appeared stalled.
European stock markets responded positively to the unfolding situation. The UK’s FTSE 100 index rose by 2%, while France’s Cac 40 and Germany’s Dax increased by 3% and 2.1%, respectively. Global indices also reflected this upward trend, with MSCI’s All-Country World Index climbing to a new record, alongside gains in its emerging markets benchmark and Asia Pacific shares outside Japan, which rose by 2.5%.