Oil prices experienced a decline while stock markets observed an upswing following statements by Donald Trump suggesting an end to hostilities with Iran, contingent on a potential agreement with Washington. The U.S. president indicated via social media that should Iran adhere to previously agreed terms, a conflict dubbed “Epic Fury” would cease, and the strategic Strait of Hormuz would be accessible “to all,” including Iran. This promise, however, came with a warning that failure to reach a deal would result in intensified military actions.
Trump’s announcement coincided with his decision to temporarily pause the “Project Freedom” operation, which involved escorting ships through the Hormuz Strait, a vital channel for approximately 20% of the world’s oil supply that Iran had blockaded since February, sparking a global energy crisis. Though he halted this operation, the blockade of Iranian ports remains in effect. In response, Iran’s Revolutionary Guards’ Navy assured the security of navigation through the strait, signaling new measures in place amid diminishing U.S. threats.
The immediate effect of Trump’s announcement led to a significant drop in Brent crude oil prices, plummeting 11% to $97 a barrel, marking its lowest point since April 22. The British wholesale gas market also saw a downturn, with the June contract dropping 6.3% to 107.8p a therm. Airline stocks benefited from the prospect of eased tensions, suggesting improved conditions for international travel. Market optimism was further buoyed by reports suggesting the U.S. and Iran were nearing a preliminary agreement to cease their conflict, potentially paving the way for more detailed nuclear discussions.
Nevertheless, later in the day, oil prices rebounded slightly, reducing the loss to 7.3% as Iran dismissed the notion of an imminent agreement as an “American wishlist.” The specifics of Iran’s new procedures in the Strait of Hormuz remain undisclosed, though Iranian authorities expressed gratitude to shipowners and captains for complying with local regulations.
European stock exchanges responded positively to the developments. The UK’s FTSE 100 index increased by 2%, France’s Cac 40 saw a rise of 3%, and Germany’s Dax climbed by 2.1%. Additionally, MSCI’s All-Country World Index achieved a new record, with its emerging markets benchmark and the broadest index of Asia Pacific shares outside Japan rising by 2.5%.