In an unexpected turn of events, oil prices plummeted while stock markets surged following President Donald Trump’s declaration that the conflict with Iran could come to an end, provided Tehran agrees to a deal with Washington. Trump assured that the Strait of Hormuz, a critical maritime passage for global oil supplies, would be accessible to all, including Iran, if negotiations proved successful.
Trump took to social media, stating, “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.” However, he also issued a stark warning that failure to reach an agreement would result in escalated military actions, noting, “the bombing starts” and it would be at a “much higher level and intensity than it was before.”
This announcement followed Trump’s decision to temporarily halt his “Project Freedom” initiative, which involved escorting ships through the strait since Iran’s blockade in late February had sparked a global energy crisis. Despite the pause in operations, Trump confirmed that the blockade of Iranian ports would persist. Iran’s Revolutionary Guards’ Navy responded by assuring safe passage through the strait, highlighting that US threats were diminishing, though they did not specify the new measures to be implemented.
As news of potential diplomatic progress broke, Brent crude oil prices, which had surged by as much as 6% earlier due to regional tensions, dropped dramatically by 11% to $97 a barrel, marking its first dip below $100 since April. Meanwhile, wholesale gas prices also fell, and airline stocks benefited from the prospect of resumed international travel. The initial decline in oil prices was further fueled by a report suggesting that the US and Iran were close to finalizing a memorandum of understanding to end the hostilities, paving the way for more comprehensive nuclear discussions.
Despite the initial optimism, oil prices later rebounded slightly, closing down 7.3% at $101.83 a barrel after Iranian officials dismissed the US proposal as an “American wishlist [and] not a reality.” Meanwhile, European stock markets experienced a significant boost, with the UK’s FTSE 100 index climbing 2%, France’s Cac 40 up by 3%, and Germany’s Dax increasing by 2.1%. MSCI’s All-Country World Index also hit a new record, rising by 1.6%, along with similar gains for its emerging markets benchmark and Asia Pacific shares outside Japan, which increased by 2.5%.