In a significant development, oil prices experienced a decline while stock markets saw an upturn following President Donald Trump’s announcement that the conflict with Iran could conclude, potentially leading to the reopening of the Strait of Hormuz. Trump indicated that this would occur if Tehran reached an agreement with Washington. On social media, Trump stated, “If Iran agrees to the terms previously settled, which might be a substantial assumption, the renowned Epic Fury will come to an end, and the highly effective Blockade will allow the Hormuz Strait to be OPEN TO ALL, including Iran.”
Nonetheless, Trump issued a stern warning that if Iran failed to negotiate a deal, military actions would resume with increased intensity. This statement coincided with Trump’s decision to temporarily halt “Project Freedom,” an operation that has been ensuring the passage of ships through the Strait of Hormuz. This critical waterway, which handles approximately 20% of the world’s oil supplies, has been under an Iranian blockade since late February, causing a global energy crisis. Trump’s pause aims to finalize a deal with Tehran, although the blockade of Iranian ports remains in effect.
In response, Iran’s Revolutionary Guards’ Navy confirmed that safe transit would be guaranteed through the strait as US threats diminish and new procedures are implemented. This marks Iran’s initial reaction to the US decision to pause operations aiding ships stranded due to the blockade. The anticipated end of hostilities and potential reopening of the strait led to a significant drop in Brent crude oil prices, which fell 11% to $97 a barrel, marking the first drop below $100 since April 22.
Additionally, wholesale gas prices decreased, with the British June contract dropping 6.3% to 107.8p a therm, while airline stocks surged due to improved prospects for international travel. Reports suggesting that the White House was nearing a memorandum of understanding with Iran contributed to the falling crude prices. However, later in the day, oil prices recovered some losses, with Brent crude trading at $101.83 a barrel after Iran dismissed the potential deal as an “American wishlist,” not a reality.
European stock markets responded positively, with notable gains recorded across major indices. The UK’s FTSE 100 index climbed 2%, while France’s Cac 40 and Germany’s Dax increased by 3% and 2.1%, respectively. On a broader scale, MSCI’s All-Country World Index achieved a new record, rising 1.6%, alongside similar milestones for its emerging markets benchmark and its broad index of Asia Pacific shares outside Japan, which rose by 2.5%.