In a significant development, oil prices took a downturn while stock markets witnessed a surge following President Donald Trump’s announcement that the conflict with Iran could conclude if Tehran consents to a deal with Washington. Trump assured that the strategic Strait of Hormuz would be accessible to all, contingent on such an agreement. In a social media post, he stated, “Assuming Iran agrees to give what has been agreed to, which is, perhaps, a big assumption, the already legendary Epic Fury will be at an end, and the highly effective Blockade will allow the Hormuz Strait to be OPEN TO ALL, including Iran.” Yet, he warned of intensified military action if Iran fails to agree to terms, stating that “the bombing starts” at a higher level of intensity.
These remarks followed Trump’s decision to momentarily halt his operation named “Project Freedom,” which involved escorting vessels through the strait—a crucial passage for about 20% of the world’s oil supplies. The operation had been in place since Iran began a blockade in late February, causing a global energy crisis. Despite the pause in escort operations, Trump clarified that the blockade on Iranian ports would persist. Iran’s Revolutionary Guards’ Navy responded by claiming that safe passage through the strait would be ensured with the cessation of U.S. threats and the implementation of new procedures. This was the first instance of Iran addressing the U.S. action to suspend operations aimed at assisting stranded ships through the strait.
As the news unfolded, Brent crude oil prices, which had previously surged up to 6% earlier in the week due to heightened tensions in the Middle East, plummeted 11% to $97 per barrel, marking the first dip below $100 since April 22. Concurrently, wholesale gas prices experienced a drop, with the British June contract decreasing by 6.3% to 107.8p a therm. Meanwhile, stocks in the airline industry climbed, buoyed by the improved outlook for international travel. The fall in crude prices was further accelerated by reports suggesting that the White House was nearing a one-page memorandum of understanding to conclude the conflict with Iran, setting the stage for more comprehensive nuclear discussions.
Despite the initial dip, oil prices later moderated their losses and traded at $101.83 a barrel, down 7.3%, as Iran dismissed the U.S. proposal as an “American wishlist [and] not a reality.” The statement from the Revolutionary Guards did not detail the new procedures but expressed gratitude towards shipowners and captains for adhering to Iranian regulations while traversing the waterway. The oil price had previously reached $126 a barrel, its highest since 2022, following Trump’s assertion that the blockade of Iranian ports could extend for months amid stalled peace negotiations.
European stock markets responded positively on Wednesday, with the UK’s FTSE 100 index rising by 2%, France’s Cac 40 climbing 3%, and Germany’s Dax increasing by 2.1%. Additionally, MSCI’s All-Country World Index saw a 1.6% rise to a new record, alongside similar achievements for its emerging markets benchmark and its broadest index of Asia Pacific shares outside Japan, which advanced by 2.5%.