Oil prices declined and stock markets surged following President Donald Trump’s announcement that the conflict with Iran could be resolved if Tehran agrees to a deal with Washington, leading to the reopening of the Strait of Hormuz. Trump took to social media to state that assuming Iran complies with previous agreements, the ongoing Epic Fury campaign would conclude, and the blockade, which currently restricts access to the critical waterway, would be lifted, allowing free passage for all, including Iran.
However, Trump warned that failure to reach an agreement would result in intensified military action, with bombing at a heightened level. This statement came on the heels of Trump’s decision to temporarily pause the “Project Freedom” operation, which has been safeguarding ships through the strait—a major artery for global oil supplies—since its blockade by Iran in February triggered an energy crisis. Although the blockade of Iranian ports remains, the brief halt in operations aims to facilitate negotiations with Tehran. In response, the Revolutionary Guards’ Navy assured safe transit through the strait with the cessation of US threats and new procedures, marking Iran’s first response to the US’s operational pause.
Initially, the news led to a sharp drop in Brent crude oil prices, which plummeted by 11% to $97 per barrel, marking the first time it fell below $100 since April 22. This decrease followed a previous surge of up to 6% earlier in the week due to ongoing attacks in the Middle East. Wholesale gas prices also saw a decline, with the British June contract decreasing by 6.3% to 107.8p a therm. The prospect of improved international travel boosted airline stocks. As the day progressed, oil prices recovered some losses, settling at $101.83 a barrel, down 7.3%, after Iran dismissed the US proposal as an “American wishlist.” Meanwhile, reports indicated that the White House was nearing a memorandum of understanding to end hostilities, laying the groundwork for future nuclear discussions.
The Revolutionary Guards’ statement did not elaborate on the new procedures for the strait but expressed gratitude to shipowners and captains for following Iranian regulations during their passage. The recent rise in oil prices to $126 a barrel, the highest since 2022, was fueled by Trump’s earlier remarks about the potential duration of the blockade and stalled peace efforts.
European stock markets experienced a significant boost, with the UK’s FTSE 100 index climbing 2%, France’s Cac 40 gaining 3%, and Germany’s Dax increasing by 2.1%. Moreover, MSCI’s All-Country World Index rose by 1.6% to a new record, accompanied by similar milestones for its emerging markets benchmark and a broad index of Asia Pacific shares outside Japan, which advanced by 2.5%.