Global markets experienced a notable shift as oil prices dropped and stock markets surged following President Donald Trump’s announcement regarding the potential resolution of the conflict with Iran. Trump suggested that the ongoing tensions could end if Tehran agreed to a deal with Washington, stating that the Strait of Hormuz would then be accessible to all nations. This strait, a critical channel for about 20% of the world’s oil shipments, has been under blockade by Iran since February, contributing to a significant energy crisis.
In a social media post, Trump expressed optimism about striking an agreement with Iran, though he acknowledged the uncertainty involved. He warned that failure to reach a deal would lead to intensified military action, stating, “the bombing starts” at a greater intensity than before. This development followed Trump’s decision to temporarily halt “Project Freedom,” an operation escorting ships through the strait, to focus on negotiations with Tehran. Despite the pause, the blockade of Iranian ports will continue. Iran’s Revolutionary Guards’ Navy responded by assuring safe passage through the strait and suggested that US threats were diminishing.
The announcement had immediate effects on the markets. Brent crude oil prices, which had surged by 6% earlier in the week due to Middle Eastern conflicts, plummeted by 11%, dipping below $100 a barrel for the first time since April 22. Wholesale gas prices also decreased, with the British June contract dropping by 6.3% to 107.8p a therm. Airline stocks saw a boost as prospects for international travel improved. These market movements followed reports that the US and Iran were nearing a one-page memorandum of understanding to end the conflict, potentially paving the way for further nuclear discussions.
Despite the initial decline in oil prices, they later recovered some losses, ending the day at $101.83 a barrel, down 7.3%. Iran dismissed the US negotiation claims as an “American wishlist [and] not a reality.” The Revolutionary Guards did not elaborate on the new procedures for the strait but expressed gratitude to shipowners and captains for adhering to Iranian regulations during transit. Last week, oil prices had peaked at $126 a barrel, the highest since 2022, amidst concerns that the US blockade could persist for months with peace talks stalled.
European stock markets responded positively to the developments, with the UK’s FTSE 100 index climbing by 2%, France’s Cac 40 rising by 3%, and Germany’s Dax increasing by 2.1%. The MSCI All-Country World Index reached a new record, growing by 1.6%, alongside similar gains in its emerging markets benchmark and the broadest index of Asia Pacific shares outside Japan, which rose by 2.5%.