Oil prices saw a decline while stock markets experienced an upswing following Donald Trump’s announcement that the conflict with Iran could conclude if Tehran agreed to a deal with Washington. Trump assured that the Strait of Hormuz would remain accessible to all, contingent upon Iran’s compliance with the proposed agreement. In a social media post, the U.S. President stated, “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.” However, he warned that failure to reach an agreement would lead to escalated bombing at a higher level than previously seen.
This development came after Trump’s decision to temporarily halt “Project Freedom,” an operation aimed at escorting ships through the strait, which is responsible for transporting roughly 20% of the world’s oil supplies. Iran had blockaded the strait since late February, which sparked a global energy crisis. Trump mentioned pausing the operation for a brief period to finalize negotiations with Tehran, although he confirmed that the blockade of Iranian ports would continue. In response, Iran’s Revolutionary Guards’ Navy announced that safe passage through the strait would be assured, as U.S. threats were decreasing and new measures were being implemented.
Consequently, the news resulted in a significant drop in Brent crude oil prices, which had surged by as much as 6% earlier in the week due to recent Middle East tensions. The price plummeted 11% to a low of $97 per barrel, marking its first dip below $100 since April 22. Affected by the same sentiment, wholesale gas prices fell, with the British June contract decreasing by 6.3% to 107.8p per therm. Airline stocks benefited from improved prospects for international travel. The downward momentum in crude prices accelerated further following a report suggesting that the White House was nearing a one-page memorandum of understanding to end the war with Iran, potentially setting the stage for more comprehensive nuclear discussions.
Later in the day, oil prices recovered some ground, with Brent crude trading down by 7.3% at $101.83 per barrel. Iran dismissed the U.S. negotiation framework as merely an “American wishlist [and] not a reality.” The statement from the Revolutionary Guards did not detail the new transit procedures but expressed gratitude to shipowners and captains for adhering to Iranian regulations while navigating the strait.
Last week, oil prices had reached $126 a barrel, the highest since 2022, after Trump indicated that the U.S. blockade of Iranian ports might continue for months amid stalled peace negotiations. Meanwhile, European stock markets rallied, with the UK’s FTSE 100 index climbing 2%, France’s CAC 40 rising 3%, and Germany’s DAX increasing by 2.1%. The MSCI All-Country World Index saw a 1.6% rise, achieving a new record alongside similar gains in its emerging markets benchmark and the broadest index of Asia Pacific shares outside Japan, which grew by 2.5%.