Oil prices saw a sharp decline while stock markets experienced an upswing following President Donald Trump’s announcement that the conflict with Iran could conclude if Tehran reaches an agreement with Washington. Trump communicated through social media, stating that the ongoing confrontation, dubbed Epic Fury, would cease and the strategic Strait of Hormuz would be accessible to all, including Iran, contingent upon Iran’s adherence to the terms discussed. However, he cautioned that failure to reach a deal would result in the resumption of bombing at an even more intense level than before.
This development occurred shortly after President Trump declared a temporary halt to “Project Freedom,” an initiative aimed at escorting ships through the Strait of Hormuz. The strait, a crucial passageway for about 20% of global oil shipments, has been under an Iranian blockade since late February, contributing to a worldwide energy crisis. While pausing the operation to facilitate negotiations with Iran, Trump indicated that the blockade on Iranian ports would remain intact. In response, the Revolutionary Guards’ Navy assured that safe passage through the strait would be maintained as US threats diminish and new protocols are introduced.
The announcement initially caused a significant drop in Brent crude oil prices, which had surged by nearly 6% earlier in the week due to recent Middle Eastern tensions. Prices plummeted 11% to $97 per barrel, marking the first dip below $100 since April 22. Concurrently, wholesale gas prices decreased, with the British June contract falling 6.3% to 107.8p a therm, while airline stocks rose due to improved prospects for international travel. An Axios report suggesting that the White House was close to finalizing a memorandum of understanding with Iran to end the conflict further accelerated the decline in oil prices. However, prices later rebounded slightly, trading down 7.3% at $101.83 per barrel, as Iran dismissed the US claims as an “American wishlist [and] not a reality.”
Iran’s Revolutionary Guards did not specify the nature of the new procedures for strait passage, but they expressed gratitude to shipowners and captains for adhering to Iranian regulations while navigating the waterway. Previously, oil prices had reached $126 per barrel, the highest since 2022, following Trump’s indication that the US blockade of Iranian ports could persist for months amidst stalled peace talks.
The optimism surrounding potential negotiations led to a rally in European stock markets on Wednesday. The UK’s FTSE 100 index increased by 2%, France’s Cac 40 climbed 3%, and Germany’s Dax rose by 2.1%. MSCI’s All-Country World Index also saw a 1.6% rise, achieving a new record alongside similar gains in its emerging markets benchmark and its broadest index of Asia Pacific shares outside Japan, which rose by 2.5%.