Oil prices experienced a sharp decline while stock markets surged after President Donald Trump announced the potential end of the conflict with Iran, contingent upon Tehran agreeing to a deal with Washington. Trump assured that the Strait of Hormuz, a critical waterway for global oil transport, would be open to all, including Iran, if an agreement was reached. However, he cautioned that failure to secure a deal would lead to intensified military actions.
The president’s statement followed his decision to temporarily pause “Project Freedom,” a naval operation intended to escort ships through the Strait of Hormuz. This route, which handles approximately a fifth of the world’s oil supply, has been blockaded by Iran since February, causing a significant energy crisis. Trump emphasized that while the escort operation would halt briefly to finalize negotiations with Iran, the blockade on Iranian ports would persist. In response, Iran’s Revolutionary Guards’ Navy expressed commitment to ensuring safe passage through the strait under new procedures, marking its first official comment on the U.S. decision to pause its operations.
Following these developments, Brent crude oil prices plummeted by 11%, dropping to $97 per barrel, marking the first time the price fell below $100 since April 22. Wholesale gas prices also saw a decrease, with the British June contract falling 6.3% to 107.8p a therm. The potential for improved international travel led to a rise in airline stock values. Earlier in the day, a report suggested that the White House was nearing a memorandum of understanding to resolve the conflict with Iran, which further influenced the decline in oil prices.
However, the oil market later regained some ground, with prices trading down 7.3% at $101.83 a barrel after Iran dismissed the U.S. proposal as merely an “American wishlist.” The statement from the Guards did not detail the new procedures but acknowledged the cooperation of shipowners and captains adhering to Iranian regulations in the strait.
The prospect of a peaceful resolution buoyed European stock markets, with the UK’s FTSE 100 index rising by 2%, France’s Cac 40 climbing 3%, and Germany’s Dax increasing by 2.1%. Additionally, MSCI’s All-Country World Index reached a new high, with its emerging markets benchmark and the Asia Pacific shares outside Japan index rising by 2.5%.