Oil prices took a downturn and stock markets showed gains following statements from Donald Trump, indicating that the conflict with Iran might conclude and the Strait of Hormuz would be accessible to all if Tehran reached an agreement with Washington. The U.S. President conveyed via social media that assuming Iran complies with already established terms, the “Epic Fury” would cease, and the blockade would make the Hormuz Strait accessible to all, including Iran. Nonetheless, he cautioned that failure to reach a deal would result in escalated bombing campaigns of greater intensity.
Trump’s announcement came after he temporarily halted the “Project Freedom” mission, which involved escorting vessels through the strategic Strait of Hormuz, a crucial passage for about 20% of the world’s oil supply. Iran had blocked the strait since late February, exacerbating a global energy crisis. The President clarified that operations would pause briefly to finalize discussions with Tehran, although the blockade of Iranian ports would persist. In response, Iran’s Revolutionary Guards’ Navy assured that the strait’s safe passage would be maintained with the cessation of U.S. threats, their first acknowledgment of the U.S. decision to suspend operations meant to assist stranded ships.
Initially, the news led to a significant drop in Brent crude oil prices, which had surged by up to 6% earlier in the week due to Middle Eastern conflicts. The price plummeted 11% to $97 a barrel, marking its first dip below $100 since April 22. Similarly, wholesale gas prices decreased, with the British June contract declining by 6.3%. Meanwhile, airline stocks experienced a boost, reflecting optimism for enhanced international travel prospects. The downward trend in crude prices accelerated following an Axios report suggesting that the White House was nearing a one-page memorandum of understanding with Iran to end the hostilities, aiming to set a foundation for comprehensive nuclear discussions.
Despite the initial drop, oil prices partially rebounded, trading at $101.83 a barrel after Iran dismissed the memorandum as an “American wishlist” rather than a tangible agreement. The Guards’ statement regarding the strait did not reveal specifics on new procedures but acknowledged the cooperation of shipowners and captains in adhering to Iranian regulations during transit.
European stock markets responded positively to these developments, with the UK’s FTSE 100 index increasing by 2%, France’s Cac 40 by 3%, and Germany’s Dax by 2.1%. Additionally, MSCI’s All-Country World Index achieved a record high with a 1.6% rise, coinciding with similar records for its emerging markets benchmark and the broadest index of Asia Pacific shares outside Japan, which climbed by 2.5%.