Oil prices experienced a significant drop while stock markets saw an upswing following U.S. President Donald Trump’s announcement that the conflict with Iran might be nearing an end. Trump indicated that the Strait of Hormuz, a critical channel for global oil supply, could soon be accessible to all if Iran agrees to a deal with Washington. The president took to social media to outline his conditions, suggesting that if Iran commits to previously discussed terms, the longstanding tensions termed as “Epic Fury” could conclude, allowing free transit through the strait. Trump cautioned, however, that failing to secure an agreement would lead to an escalation in bombing, more intense than before.
The president’s comments came amid his decision to temporarily halt “Project Freedom,” an operation aimed at escorting vessels through the strategic waterway that Iran has blockaded since February. This blockade has contributed to a global energy crisis, as the strait is a conduit for approximately 20% of the world’s oil supplies. Despite pausing the operation to finalize potential agreements with Iran, Trump emphasized that the blockade on Iranian ports would persist. In response, the Iranian Revolutionary Guards’ Navy stated that with the U.S. threats subsiding, new measures would ensure safe passage through the strait, though specifics were not elaborated upon.
Initially, the news led to a sharp decline in Brent crude oil prices, which dropped by 11% to $97 a barrel, marking the first dip below $100 since April 22. The decline in oil prices coincided with falling wholesale gas prices, as the British June contract decreased by 6.3% to 107.8p a therm. This development also spurred a rise in airline stocks due to improved prospects for international travel. The downward trend in crude prices accelerated following reports that the White House was nearing a one-page memorandum of understanding to end the conflict with Iran, paving the way for detailed nuclear discussions.
However, oil prices later recovered some of their losses, with Brent crude trading down 7.3% at $101.83 a barrel. This adjustment came after Iran dismissed the proposed agreement as merely an “American wishlist” rather than a feasible reality. Amid these developments, the oil price had previously surged to $126 a barrel last week, its peak since 2022, due to prolonged U.S. blockades and stalled peace negotiations.
European stock markets reacted positively to the unfolding situation. The UK’s FTSE 100 index increased by 2%, France’s Cac 40 went up by 3%, and Germany’s Dax rose by 2.1%. Globally, MSCI’s All-Country World Index also rose by 1.6% to a new high, alongside similar achievements in its emerging markets benchmark and the broadest index of Asia Pacific shares outside Japan, which climbed by 2.5%.