Oil prices experienced a significant drop and stock markets saw gains following President Donald Trump’s announcement that the conflict with Iran could conclude, allowing the strategic Strait of Hormuz to be “open to all” if Tehran reaches an agreement with Washington. Trump’s statement on social media suggested an end to the hostilities, contingent upon Iran fulfilling its part of a potential deal. However, he issued a stark warning, indicating that without a deal, military actions would resume at intensified levels.
The president’s remarks came after he declared a temporary halt to the “Project Freedom” operation, which involved escorting ships through the Strait of Hormuz. This crucial maritime passage, responsible for transporting roughly 20% of the world’s oil, has been under Iranian blockade since late February, exacerbating a global energy crisis. Although Trump paused the operation to negotiate with Tehran, he maintained that the blockade on Iranian ports would persist. Iran’s Revolutionary Guards’ Navy responded by stating that safe passage through the strait would be assured with the cessation of U.S. threats and the introduction of new protocols.
The news led to a sharp decline in Brent crude oil prices, which plummeted 11% to as low as $97 per barrel, marking the first time they had fallen below $100 since April 22. Wholesale gas prices also decreased, with the British June contract dropping 6.3% to 107.8p a therm. Concurrently, airline stocks surged on the improved outlook for international travel. The decline in crude prices accelerated after reports suggested that the White House was nearing a one-page memorandum of understanding to conclude the conflict with Iran, setting the stage for more comprehensive nuclear discussions.
Despite these developments, oil prices later recovered some of their losses, trading down 7.3% at $101.83 per barrel, as Iran dismissed the potential agreement as an “American wishlist [and] not a reality.” The Revolutionary Guards’ statement did not detail the new procedures but expressed gratitude toward shipowners and captains for adhering to Iranian regulations while navigating the waterway. Last week, oil prices had peaked at $126 a barrel, their highest since 2022, amid concerns over the duration of the U.S. blockade and stalled peace talks.
In response to these geopolitical shifts, European stock markets rallied, with the UK’s FTSE 100 index rising by 2%, France’s Cac 40 climbing 3%, and Germany’s Dax increasing by 2.1%. Meanwhile, the MSCI’s All-Country World Index achieved a record high, advancing by 1.6%, alongside notable gains in its emerging markets benchmark and its Asia Pacific shares index outside Japan, which rose by 2.5%.