Oil prices experienced a significant drop while stock markets saw an upswing following statements from Donald Trump, suggesting a potential end to the conflict with Iran and reopening of the Strait of Hormuz. Trump indicated on social media that the war, dubbed “Epic Fury,” could conclude if Iran complies with previously agreed terms. This development would lead to the reopening of the critical oil passageway for all nations, including Iran.
The US president emphasized, however, that without a deal, military actions would resume with increased intensity. His remarks followed his decision to temporarily pause the “Project Freedom” operation, which involved escorting ships through the strait. This strategic waterway, responsible for about 20% of the world’s oil transport, has been under an Iranian blockade since February, exacerbating a global energy crisis. Trump’s pause aims to facilitate finalizing an agreement with Tehran, though he maintained that US port blockades would continue.
Iran’s Revolutionary Guards’ Navy responded by assuring safe passage through the strait, suggesting that US threats were diminishing and new procedures were being implemented. This statement marked Iran’s initial reaction to the US halting its operations designed to aid stranded maritime traffic. The announcement initially drove Brent crude oil prices down by 11% to $97 per barrel, marking the first time the price fell below $100 since April. Wholesale gas prices also dropped, while airline stocks climbed, driven by optimism regarding international travel prospects.
Despite the initial decline, oil prices later regained some ground, with Brent crude trading at $101.83 per barrel. This recovery followed Iran’s dismissal of the potential agreement as an “American wishlist.” The earlier decline in oil prices was accelerated by reports that a memorandum of understanding between the US and Iran was nearing completion, paving the way for more detailed nuclear discussions. This report, citing US officials among others, suggested a framework was being prepared to end the conflict.
European stock markets responded positively to these developments, 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 reached a new record high, along with its emerging markets benchmark and the broadest index of Asia Pacific shares outside Japan, which rose by 2.5%.