Oil prices experienced a notable decline while stock markets saw an upswing after President Donald Trump announced a potential resolution to the conflict with Iran, contingent on Tehran reaching an agreement with Washington. Trump assured that if Iran consents to the terms agreed upon, the conflict dubbed “Epic Fury” would conclude, and the strategic Strait of Hormuz would be accessible to all, including Iran. However, he cautioned that failure to secure a deal would result in intensified bombing campaigns.
This development follows Trump’s decision to temporarily halt “Project Freedom,” an initiative aimed at escorting vessels through the Strait of Hormuz. This vital channel, accounting for about 20% of the world’s oil supply, has been under an Iranian blockade since late February, contributing to a global energy crisis. Trump emphasized that while the escort operation would pause briefly to allow for negotiations, the blockade on Iranian ports would continue. In response, Iran’s Revolutionary Guards’ Navy assured safe passage through the strait amid reduced U.S. threats, marking their initial response to the U.S. decision to pause operations.
The announcement had an immediate impact on oil markets. Brent crude oil, having spiked by up to 6% earlier due to recent Middle East tensions, plummeted 11% to $97 a barrel, marking its first drop below $100 since April 22. Similarly, wholesale gas prices decreased, with the British June contract dipping 6.3% to 107.8p a therm. Airline stocks benefitted from the improved outlook for international travel. The decline in crude prices followed a report suggesting that the White House was nearing a preliminary agreement to end hostilities with Iran, setting the stage for more in-depth nuclear negotiations. Despite this initial drop, oil prices later rebounded slightly, with Iran dismissing the U.S. proposal as an “American wishlist,” not grounded in reality.
The Revolutionary Guards’ statement did not clarify the new procedures for ensuring safe passage but expressed gratitude to shipowners and captains for adhering to Iranian regulations. This statement came after oil prices had peaked at $126 a barrel the previous week, the highest since 2022, amid uncertainties over the duration of the U.S. blockade and stalled peace negotiations.
European stock markets responded positively to these developments, with the UK’s FTSE 100 index gaining 2%, France’s Cac 40 rising by 3%, and Germany’s Dax increasing by 2.1%. The MSCI All-Country World Index climbed 1.6% to reach a new record, mirroring similar achievements for its emerging markets benchmark and the broad index of Asia Pacific shares outside Japan, which rose 2.5%.