Oil prices experienced a significant drop while stock markets saw gains following statements from former President Donald Trump regarding the potential resolution of the conflict with Iran. Trump indicated that if Iran agrees to a deal with Washington, the war would conclude, and the strategically crucial Strait of Hormuz would be “open to all.” In a social media post, Trump expressed optimism about the possibility, although he acknowledged the assumption was substantial. He warned that failure to reach an agreement would result in intensified military action, marking a stark contrast to the hopeful scenario he outlined.
The remarks came as Trump announced a temporary halt to the “Project Freedom” operation, which involved escorting ships through the Strait of Hormuz. The waterway, responsible for transporting approximately one-fifth of the world’s oil supply, has been blockaded by Iran since late February, exacerbating a global energy crisis. Although the operation’s pause is intended to facilitate negotiations with Tehran, Trump emphasized that his blockade of Iranian ports would persist. In response, Iran’s Revolutionary Guards’ Navy assured that safe passage through the strait would be secured as US threats diminish and new measures are implemented.
Initially, the news led to an 11% decline in Brent crude oil prices, bringing them down to $97 per barrel—the first instance since April 22 that they fell below the $100 mark. Wholesale gas prices also saw a decrease, with the British June contract falling 6.3% to 107.8 pence per therm. The prospect of a deal and subsequent reduction in geopolitical tensions also buoyed airline stocks, hinting at improved conditions for international travel. Earlier reports suggested that the White House was nearing a one-page memorandum of understanding with Iran to conclude the conflict, potentially laying the groundwork for detailed nuclear negotiations.
However, later in the day, oil prices partially recovered, trading at $101.83 per barrel, a 7.3% reduction, after Iran dismissed the proposal as merely an “American wishlist.” The specific nature of the new procedures mentioned by the Guards remains unspecified, though they expressed gratitude to shipowners and captains for adhering to Iranian regulations during transit.
In the wake of these developments, European stock markets rallied, with the UK’s FTSE 100 index climbing 2%, France’s Cac 40 rising by 3%, and Germany’s Dax increasing by 2.1%. The MSCI All-Country World Index also reached a new high, as did its emerging markets benchmark and its broad Asia Pacific index excluding Japan, which rose 2.5%. This positive market reaction reflects the cautious optimism surrounding the potential resolution of tensions in the Middle East.