In a significant development, oil prices dropped while stock markets experienced an upswing as U.S. President Donald Trump announced the potential end of conflict with Iran, contingent on a diplomatic agreement. Trump indicated that if Iran complies with the terms previously discussed, the longstanding conflict dubbed “Epic Fury” could conclude, and the strategic Strait of Hormuz would become accessible to all nations, including Iran. Trump shared on social media that although reaching such an agreement might be a substantial assumption, it could lead to the easing of military actions and economic blockades.
Despite these diplomatic overtures, Trump warned that failure to reach a deal would result in escalated military actions against Iran, suggesting that any future conflicts could occur at a greater intensity. This statement followed his announcement to temporarily suspend the “Project Freedom” operation, which has been escorting vessels through the vital Strait of Hormuz. This waterway, crucial for transporting about 20% of global oil supplies, has been under Iranian blockade since February, exacerbating a global energy crisis.
The president’s announcement had an immediate impact on global markets. Brent crude oil, which had surged by up to 6% earlier in the week due to tensions in the Middle East, saw a sharp decline of 11%, falling to $97 a barrel, marking its first dip below $100 since April. Wholesale gas prices also saw a decrease, with the British June contract dropping 6.3% to 107.8p a therm. Airline stocks, meanwhile, rose on the prospect of improved conditions for international travel, spurred by reports that a memorandum of understanding between the U.S. and Iran might soon be finalized, paving the way for more substantive nuclear negotiations.
However, later in the day, oil prices partially rebounded, with Brent crude trading at $101.83 a barrel as Iran dismissed the potential agreement as an “American wishlist” rather than a real possibility. The Iranian Revolutionary Guards’ Navy issued a statement acknowledging the U.S. decision to pause its operations in the strait, though it did not detail the new procedures. The statement expressed gratitude to shipowners and captains for adhering to Iranian regulations while navigating the waterway.
The geopolitical developments also influenced European stock markets, leading to rallies across the continent. The UK’s FTSE 100 index rose by 2%, while France’s Cac 40 and Germany’s Dax saw increases of 3% and 2.1%, respectively. Additionally, MSCI’s All-Country World Index surged by 1.6% to a new all-time high, reflecting similar gains in its emerging markets benchmark and the broadest index of Asia Pacific shares outside Japan, which climbed by 2.5%.