In a significant development in U.S.-Iran relations, oil prices dropped and stock markets gained after President Donald Trump announced that the conflict with Iran could come to an end if Tehran agreed to a deal with Washington. Trump stated on social media that the war, dubbed “Epic Fury,” would cease, and the strategic Strait of Hormuz would be open to all, including Iran, assuming Tehran fulfills its commitments. However, he warned that failure to reach an agreement would result in intensified bombing.
The president’s remarks followed his decision to temporarily halt “Project Freedom,” an operation aimed at escorting ships through the Strait of Hormuz, a crucial passage for about 20% of the world’s oil supply. Iran has blockaded the strait since late February, leading to a global energy crisis. Trump emphasized that while the escort operation is paused to negotiate a deal with Iran, the U.S. blockade of Iranian ports remains in effect. In response, Iran’s Revolutionary Guards’ Navy indicated new procedures would ensure safe transit through the strait, marking Iran’s initial reaction to the U.S.’s operational pause.
Following these developments, Brent crude oil prices, which had surged by 6% earlier due to Middle East tensions, plummeted 11% to $97 per barrel, dipping below $100 for the first time since April 22. Wholesale gas prices decreased as well, with the British June contract dropping 6.3% to 107.8p a therm. Airline stocks benefited from the prospect of improved international travel. The decline in oil prices accelerated after reports suggested the White House was nearing a one-page memorandum of understanding with Iran to end hostilities, setting the stage for more detailed nuclear discussions.
Despite the initial decline, oil prices later rebounded to $101.83 a barrel, down 7.3%, as Iran dismissed the potential agreement as merely an “American wishlist.” The specifics of Iran’s new transit procedures through the strait remain unclear, though the Guards expressed gratitude to shipowners and captains for adhering to Iranian regulations.
In the stock markets, European indices saw rallies, with the UK’s FTSE 100 index climbing 2%, France’s Cac 40 increasing by 3%, and Germany’s Dax rising by 2.1%. Meanwhile, MSCI’s All-Country World Index rose 1.6% to a new record, alongside milestones for its emerging markets benchmark and a broad index of Asia Pacific shares outside Japan, which gained 2.5%.