In a move that caused oil prices to drop and stock markets to climb, President Donald Trump announced that a conflict with Iran could be nearing an end if Tehran were to agree to a deal with Washington. Trump assured that the Strait of Hormuz would be accessible to all, contingent on Iran’s compliance with the terms. He expressed this on social media, noting that the end of the “legendary Epic Fury” would result in the highly efficient blockade allowing for open passage through the strategic waterway. However, Trump also warned that failure to secure a deal would lead to intensified military action against Iran.
The announcement followed Trump’s decision to temporarily pause “Project Freedom,” an operation designed to escort ships through the Strait of Hormuz, a crucial channel for about 20% of the world’s oil supplies, which has been blockaded by Iran since late February. This blockade has been a significant factor in the ongoing global energy crisis. Trump clarified that while the escort operation would be paused to facilitate negotiations, the blockade on Iranian ports would remain intact. In response, Iran’s Revolutionary Guards’ Navy stated that new procedures would ensure safe passage through the strait, marking Iran’s initial reaction to the US’s temporary halt of its maritime operations.
The prospect of a potential resolution caused a notable drop in Brent crude oil prices, which had surged earlier in the week due to rising tensions in the Middle East. The price fell by 11%, reaching a low of $97 per barrel, marking the first instance it dipped below $100 since April 22. Similarly, wholesale gas prices saw a decline, with the British June contract falling by 6.3% to 107.8p a therm. Airline stocks experienced gains, buoyed by the improved outlook for international travel. Reports indicated that the US was close to reaching a preliminary one-page memorandum of understanding with Iran, setting the stage for more detailed nuclear discussions.
Despite the initial drop, oil prices later reduced their losses, with Brent crude trading down 7.3% at $101.83 a barrel. Iran dismissed the existence of a deal as merely an “American wishlist [and] not a reality.” The Revolutionary Guards’ statement did not detail the new procedures for the strait but acknowledged the compliance of shipowners and captains with Iranian regulations during transit.
The recent developments sparked a rally in European stock markets, with the UK’s FTSE 100 index rising by 2%, France’s Cac 40 increasing by 3%, and Germany’s Dax climbing by 2.1%. The MSCI All-Country World Index also saw a boost, rising 1.6% to a new record, alongside similar milestones for its emerging markets benchmark and the Asia Pacific shares index outside Japan, which rose by 2.5%. The oil price had previously reached a peak of $126 a barrel the previous week, the highest since 2022, as concerns about a prolonged US blockade and stalled peace talks had weighed heavily on the market.