In a significant development, oil prices dropped while stock markets experienced an upswing following President Donald Trump’s announcement regarding the potential end of hostilities with Iran. Trump indicated that the strait of Hormuz would be accessible to all if Tehran reaches an agreement with Washington. Through a social media post, the US president stated that if Iran meets previously agreed terms, the conflict known as Epic Fury would conclude, and measures would be taken to ensure the Hormuz Strait remains open to all, including Iran. However, Trump warned that without a deal, military actions would escalate to a higher intensity.
This statement came after Trump decided to temporarily halt “Project Freedom,” an operation aimed at escorting ships through the Hormuz Strait. The strait, a critical waterway for global oil supplies, has been under Iranian blockade since late February, causing a worldwide energy crisis. While Trump announced a short pause in the operation to finalize negotiations with Iran, he maintained that the blockade on Iranian ports would continue. Iran’s Revolutionary Guards’ Navy responded by assuring safe passage through the strait, as US threats seemed to diminish and new procedures were put in place. This marked Iran’s initial reaction to the US pausing its operations in the region.
The announcement led to a sharp decline in Brent crude oil prices, which fell 11% to $97 a barrel, marking the first time it dipped below $100 since late April. Wholesale gas prices also saw a reduction, with the British June contract dropping 6.3% to 107.8p a therm. Simultaneously, airline stocks surged on prospects of enhanced international travel. The price of oil had already been declining earlier that day and fell further following a report suggesting the White House was nearing an agreement with Iran to end hostilities. This report, which cited sources including US officials, mentioned the possibility of a one-page memorandum to set a framework for detailed nuclear discussions.
Despite this initial drop, oil prices later regained some ground, trading at $101.83 a barrel, down 7.3%, after Iran dismissed the proposed agreement as an “American wishlist” rather than a practical reality. The statement from the Revolutionary Guards did not clarify the new procedures for the strait but expressed gratitude towards shipowners and captains for adhering to Iranian regulations while navigating the waterway.
Last week, oil prices had surged to $126 a barrel, the highest since 2022, following Trump’s statement that the US blockade of Iranian ports could extend for months amid stalled peace talks. Meanwhile, European stock markets responded positively, with the UK’s FTSE 100, France’s Cac 40, and Germany’s Dax all experiencing gains. Additionally, global indices like MSCI’s All-Country World Index and its emerging markets benchmark reached new records, reflecting the optimistic outlook in the markets.