In a significant turn of events, oil prices dropped while stock markets experienced an upswing following President Donald Trump’s announcement regarding potential peace with Iran. Trump indicated that the ongoing conflict could come to an end if Tehran agrees to a deal with Washington, promising that the strategic Strait of Hormuz would be open for transit. His message, shared on social media, stated that assuming Iran fulfills its commitments, the “Epic Fury” would conclude, and the blockade would allow the strait to be accessible to all, including Iran. However, he cautioned that if no deal is reached, the U.S. would resume military actions with heightened intensity.
This announcement came as Trump opted for a temporary halt to his “Project Freedom” operation, which involves escorting ships through the Strait of Hormuz, a crucial passage for about 20% of the world’s oil supply. The strait has been under Iranian blockade since February, contributing to a global energy crisis. Despite the pause, Trump emphasized that the blockade of Iranian ports would continue. In response, Iran’s Revolutionary Guards’ Navy assured safe passage through the strait, marking their first reaction to the U.S. halting its escort operations.
Following the news, Brent crude oil prices, which had surged by 6% earlier in the week due to Middle East tensions, plunged by 11% to a low of $97 a barrel, marking the first drop below $100 since April 22. Wholesale gas prices also saw a decrease, with the British June contract falling by 6.3%. Meanwhile, airline stocks rose, buoyed by the prospect of smoother international travel. The oil price decline accelerated after reports suggested that the U.S. was nearing a memorandum of understanding with Iran to end the conflict, potentially laying the groundwork for detailed nuclear talks.
Despite the initial plunge, oil prices later trimmed their losses, trading down 7.3% at $101.83 a barrel after Iran dismissed the U.S. proposal as an “American wishlist [and] not a reality.” The Revolutionary Guards’ statement did not elaborate on what the new procedures for the strait would entail but expressed gratitude to shipowners and captains for adhering to Iranian regulations.
European stock markets responded positively to the developments. The UK’s FTSE 100 index gained 2%, France’s Cac 40 climbed 3%, and Germany’s Dax increased by 2.1%. Globally, the MSCI All-Country World Index hit a new record, rising 1.6%, alongside similar gains in emerging markets and Asia Pacific shares outside Japan, which experienced a 2.5% increase.