Oil prices experienced a decline while stock markets saw gains following U.S. President Donald Trump’s assertion that the conflict with Iran could come to a resolution, promising that the Strait of Hormuz would remain accessible if Tehran agreed to a deal with Washington. Trump took to social media to express that the end of the conflict, referred to as “Epic Fury,” would hinge on Iran’s compliance with prior agreements. He indicated that this would also lead to the successful operation of the blockade, ensuring open access to the Strait of Hormuz for all, including Iran. However, he warned that if Iran failed to reach an agreement, the situation could escalate with increased bombing.
Trump’s statements followed his announcement of a temporary halt to the “Project Freedom” operation, which had been escorting ships through the crucial Strait of Hormuz. This waterway, responsible for about 20% of the world’s oil transport, has been under an Iranian blockade since late February, leading to a global energy crisis. While Trump paused the operation to secure a deal with Iran, he maintained that the blockade of Iranian ports would continue. Iran’s Revolutionary Guards’ Navy responded, noting that the U.S. threats would cease, and new regulations would ensure safe passage through the strait. This marked Iran’s initial reaction to the U.S. pausing its operations meant to assist stranded ships.
The news of potential diplomatic progress caused Brent crude oil to drop significantly, with prices falling 11% to $97 per barrel, the lowest since April 22. Wholesale gas prices also decreased, with the British June contract dropping 6.3% to 107.8p a therm. The prospect of improved international travel prospects led to a rise in airline stocks. Despite the initial decline, oil prices later moderated, settling at $101.83 per barrel as Iran dismissed the U.S. proposal as an “American wishlist” rather than a concrete resolution. The Guards’ statement did not elaborate on the new procedures but expressed gratitude to shipowners and captains for adhering to Iranian regulations.
Previously, oil prices had surged to $126 a barrel, reaching their highest level since 2022, as Trump’s comments on the prolonged blockade of Iranian ports and stalled peace talks fueled market concerns. The potential for an agreement, reported to be close by the White House, further influenced market dynamics. The Axios report suggested both sides were nearing a one-page memorandum of understanding to conclude the conflict and lay the groundwork for detailed nuclear discussions.
European stock markets responded positively to the developments, with the UK’s FTSE 100 index climbing 2%, France’s Cac 40 improving by 3%, and Germany’s Dax gaining 2.1%. Globally, MSCI’s All-Country World Index reached a new record, increasing by 1.6%, alongside similar milestones for its emerging markets benchmark and the broadest index of Asia Pacific shares outside Japan, which rose by 2.5%.