In a recent development, oil prices dropped while stock markets saw an uptick following President Donald Trump’s announcement that the conflict with Iran could conclude if Tehran agrees to a deal with Washington. Trump took to social media, stating that should Iran fulfill the agreed terms, the conflict dubbed “Epic Fury” would end, and the blockade would open the Strait of Hormuz to all, including Iran. However, he issued a stark warning that failure to reach an agreement would result in bombing at a higher intensity than before.
The president’s comments came on the heels of his decision to pause the “Project Freedom” operation, which involved escorting ships through the strategically vital Strait of Hormuz, through which about 20% of the world’s oil supply passes. Iran’s blockade of the strait since late February has triggered a global energy crisis. While the operation is on hold to finalize a deal with Iran, Trump emphasized that the blockade of Iranian ports remains. Reacting to the pause, Iran’s Revolutionary Guards’ Navy assured that safe transit through the strait would be maintained, indicating a shift in procedures.
The immediate impact of these developments saw Brent crude oil, which had surged by 6% earlier in the week due to Middle East tensions, plummet by 11%, reaching a low of $97 per barrel, the first dip below $100 since April. Similarly, wholesale gas prices fell, with the British June contract dropping 6.3% to 107.8p a therm. Concurrently, airline stocks benefited from the improved outlook for international travel. The oil market’s reaction was also influenced by a report suggesting that the White House was nearing a memorandum of understanding to end the conflict, potentially setting the stage for more comprehensive nuclear discussions.
However, oil prices partially recovered later, trading at $101.83 a barrel after Iran dismissed the agreement as merely an “American wishlist.” The Revolutionary Guards did not clarify the new procedures for the Strait of Hormuz but expressed gratitude to shipowners and captains for adhering to Iranian regulations. Last week, oil prices had soared to $126 a barrel, the highest since 2022, as uncertainty loomed over the duration of the U.S. blockade and the stalled peace talks.
Meanwhile, European stock markets reacted positively, with the UK’s FTSE 100 index climbing 2%, France’s Cac 40 increasing by 3%, and Germany’s Dax rising by 2.1%. The MSCI All-Country World Index also reached a new record, alongside milestones for its emerging markets benchmark and the broadest index of Asia Pacific shares outside Japan, which rose by 2.5%.