In a significant turn of events, oil prices experienced a decline and stock markets saw an upward trend following remarks by former U.S. President Donald Trump, who suggested that the conflict with Iran might come to an end. Trump indicated that the Strait of Hormuz, a crucial shipping route, would be accessible to all if Tehran reached an agreement with Washington. On social media, Trump noted, “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.” He cautioned, however, that failure to secure a deal would lead to intensified bombing.
The backdrop to Trump’s comments involves his “Project Freedom” initiative, which aimed to escort ships through the strategically vital Strait of Hormuz, a passage that accounts for approximately 20% of the world’s oil supply. This operation was temporarily halted by Trump to facilitate negotiations with Tehran, though he stressed that the blockade of Iranian ports would persist. In response, Iran’s Revolutionary Guards’ Navy stated that safe passage through the strait would be ensured as U.S. threats subsided, marking Iran’s initial reaction to the U.S. pausing its operations.
The global energy market reacted swiftly to these developments. Brent crude oil prices, which had surged earlier in the week due to heightened tensions in the Middle East, plummeted by 11% to $97 a barrel, dipping below the $100 mark for the first time since April 22. Wholesale gas prices also decreased, with the British June contract falling 6.3% to 107.8p a therm. Meanwhile, airline stocks benefited from the improved outlook for international travel. Reports suggested that the U.S. and Iran were nearing a memorandum of understanding to conclude the conflict, which further influenced market dynamics.
However, the oil market later saw a partial recovery, settling at $101.83 a barrel following Iran’s dismissal of the U.S. proposal as an “American wishlist [and] not a reality.” The Revolutionary Guards did not elaborate on the specifics of the new procedures for the strait but acknowledged the cooperation of shipowners and captains in adhering to Iranian regulations.
Stock markets in Europe responded positively to the potential de-escalation of tensions. The UK’s FTSE 100 index gained 2%, France’s Cac 40 increased by 3%, and Germany’s Dax saw a rise of 2.1%. Globally, MSCI’s All-Country World Index climbed 1.6% to a record high, alongside gains in its emerging markets benchmark and the broadest index of Asia Pacific shares outside Japan, which rose by 2.5%.