Oil prices saw a decline while stock markets experienced an upswing following remarks from Donald Trump that suggested a potential end to the conflict with Iran. The U.S. President indicated that if Tehran agrees to a deal with Washington, the Strait of Hormuz would be “open to all.” Trump took to social media to express that should Iran consent to the terms previously discussed, the “already legendary Epic Fury” would conclude, and the blockade ensuring the opening of the Hormuz Strait would include Iran. However, he cautioned that failure to reach an agreement would lead to intensified military actions.
This development comes on the heels of Trump’s announcement to temporarily halt the “Project Freedom” operation, which involves escorting ships through the strategically crucial strait. The strait, which has been under Iran’s blockade since late February, plays a vital role in global oil supply, accounting for about 20% of worldwide oil transportation. Despite pausing operations to negotiate with Tehran, Trump confirmed that the blockade on Iranian ports would remain. In response, the Revolutionary Guards’ Navy assured that with U.S. threats ceasing and new procedures in place, safe passage through the strait would be guaranteed.
The immediate impact of these announcements was a sharp decline in Brent crude oil prices, plummeting by 11% to $97 a barrel, marking its first dip below $100 since April 22. This drop came after a week of heightened oil prices, which peaked at $126 per barrel after Trump’s earlier comments about a prolonged blockade. Wholesale gas prices followed suit, with the British June contract decreasing by 6.3% to 107.8p a therm. Concurrently, airline stocks saw gains due to the improved outlook for international travel.
Despite the initial downward trend in oil prices, they later moderated to a 7.3% decrease, with Brent crude trading at $101.83 a barrel. Iran’s response, labeling the U.S. deal as an “American wishlist” rather than a reality, contributed to this adjustment. The Guards’ statement regarding the strait did not elaborate on the new procedures but acknowledged the cooperation of shipowners and captains in adhering to Iranian regulations.
In the wake of these developments, European stock markets experienced notable gains. The UK’s FTSE 100 index increased by 2%, France’s Cac 40 climbed 3%, and Germany’s Dax rose by 2.1%. Additionally, MSCI’s All-Country World Index achieved a new record, rising 1.6%, alongside similar achievements in its emerging markets benchmark and its broad Asia Pacific shares index outside Japan, which gained 2.5%.