Global oil prices experienced a significant drop, and stock markets surged following President Donald Trump’s announcement regarding a potential resolution to the conflict with Iran. Trump indicated that the Strait of Hormuz, a crucial passage for about 20% of the world’s oil supply, could remain “open to all,” including Iran, if Tehran agreed to a deal with Washington. In a social media post, he remarked that the longstanding conflict, referred to as Epic Fury, would conclude under these conditions, and the blockade would be lifted.
Trump’s statement, however, came with a stern warning. He emphasized that failure to reach an agreement would result in escalating military action, stating that “the bombing starts” if a deal isn’t struck. This development follows his decision to briefly pause “Project Freedom,” an operation designed to escort ships through the Strait of Hormuz, which Iran has blockaded since February, causing a global energy crisis. The pause aims to facilitate final negotiations with Iran, although the blockade on Iranian ports remains in place. Iran’s Revolutionary Guards’ Navy responded by assuring safe passage through the strait, hinting at new procedures without specifying details, as US threats seem to be waning.
The initial market reaction saw Brent crude oil prices plummet by 11%, reaching as low as $97 per barrel, marking the first time prices dipped below $100 since April. The decline in oil prices was accompanied by a 6.3% drop in wholesale gas prices in Britain. Simultaneously, airline stocks climbed due to the improved outlook for international travel. Earlier in the day, crude prices had already been on a downward trajectory. This trend accelerated following reports suggesting the US and Iran were nearing a one-page memorandum of understanding to end their conflict, potentially setting the stage for future nuclear negotiations.
However, later in the day, oil prices regained some ground, trading at $101.83 per barrel, after Iran dismissed the reported US proposal as an “American wishlist” rather than a tangible reality. The oil market had previously soared to $126 a barrel the previous week, its highest since 2022, amid concerns that the US blockade of Iranian ports could persist for months without progress in peace talks.
In the financial markets, European stocks saw a rally on the same day. The UK’s FTSE 100 index rose by 2%, while France’s Cac 40 increased by 3%, and Germany’s Dax climbed 2.1%. The MSCI’s All-Country World Index also advanced by 1.6%, setting a new record alongside its emerging markets benchmark and its broad index of Asia Pacific shares outside Japan, which rose by 2.5%.