Oil prices experienced a significant drop while stock markets saw an upward trend as President Donald Trump announced the potential end of conflict with Iran, alongside assurances that the Strait of Hormuz would remain accessible if Tehran reached an agreement with Washington. Trump’s statement on social media highlighted that if Iran adhered to previous commitments, the “Epic Fury” would cease, and the blockade would be lifted, ensuring the strait is “OPEN TO ALL,” including Iran. However, he cautioned that failure to reach a deal could lead to intensified bombing.
This development followed Trump’s decision to temporarily halt “Project Freedom,” a military operation designed to escort oil tankers through the strategic strait, which has been under Iranian blockade since late February. The blockade had exacerbated a global energy crisis by affecting the flow of nearly a fifth of the world’s oil supply. While Trump’s naval operation is paused to finalize negotiations with Iran, the blockade of Iranian ports remains enforced. In response, Iran’s Revolutionary Guards’ Navy assured safe passage through the strait, indicating compliance with new procedures as US threats diminish.
The market initially reacted to these developments with a sharp 11% drop in Brent crude oil prices, falling to $97 a barrel, marking its first drop below $100 since April 22. Correspondingly, wholesale gas prices also declined, with the British June contract decreasing by 6.3% to 107.8p per therm. Airline stocks benefited from the positive outlook for international travel. The oil’s downward trajectory was further propelled by reports suggesting the White House was nearing a one-page memorandum of understanding to end hostilities with Iran, laying the groundwork for more comprehensive nuclear discussions.
However, the oil market partially recovered its losses later in the day, as Iran dismissed the proposed agreement as an “American wishlist [and] not a reality,” leading to Brent crude trading down by 7.3% at $101.83 a barrel. The Iranian statement did not clarify the specifics of the new procedures but acknowledged the cooperation of shipowners and captains in adhering to Iranian regulations while navigating the waterway.
Despite recent volatility, oil prices had previously surged to $126 a barrel, the highest since 2022, due to concerns over prolonged US port blockades and stalled peace talks. Meanwhile, European stock markets responded positively to the potential de-escalation, with the UK’s FTSE 100 index climbing 2%, France’s Cac 40 gaining 3%, and Germany’s Dax increasing by 2.1%. The MSCI All-Country World Index reached a new record, climbing 1.6%, alongside similar gains in its emerging markets benchmark and the broad index of Asia Pacific shares outside Japan, which rose by 2.5%.