Oil prices experienced a sharp decline while stock markets saw an upward trend following statements from Donald Trump indicating a potential end to the conflict with Iran. The U.S. President announced via social media that if Tehran agrees to terms with Washington, the conflict, dubbed “Epic Fury,” would conclude, and the strategic Strait of Hormuz would reopen for all, including Iran. However, he cautioned that without a deal, military action could escalate to unprecedented levels.
This development follows Trump’s decision to temporarily halt his “Project Freedom” initiative, which was aimed at escorting ships through the Strait of Hormuz. The strait, a crucial passage for about 20% of the world’s oil supply, has been under an Iranian blockade since late February, contributing to a global energy crisis. Despite the pause, the blockade of Iranian ports remains intact. In response, Iran’s Revolutionary Guards’ Navy indicated that U.S. threats were subsiding and assured safe transit through the strait, although they did not clarify what new procedures would be implemented.
The announcement initially caused Brent crude oil prices to plummet by 11%, dropping to $97 a barrel—its lowest since April 22. This decline followed a significant increase earlier in the week due to ongoing Middle Eastern tensions. Additionally, wholesale gas prices dropped, with the British June contract decreasing by 6.3% to 107.8p per therm. Positive prospects for international travel also led to a rise in airline stocks. However, later in the day, oil prices recovered some ground, standing at $101.83 a barrel after Iran dismissed the U.S. proposal as merely an “American wishlist.”
The anticipation of a resolution to the conflict received a boost from reports suggesting the White House was nearing a one-page memorandum of understanding to end the hostilities. Sources indicated that this framework could pave the way for more comprehensive nuclear discussions between the two nations. Despite this optimism, Iran’s assertive stance signaled a challenging path ahead for diplomatic negotiations.
European stock markets responded positively to these developments. The UK’s FTSE 100 index saw a 2% increase, France’s Cac 40 rose by 3%, and Germany’s Dax grew by 2.1%. Additionally, the MSCI’s All-Country World Index achieved a new record, climbing 1.6%, with its emerging markets benchmark and the broadest index of Asia Pacific shares outside Japan both making significant gains, the latter rising by 2.5%.