Oil prices experienced a significant drop while stock markets saw an upward trend following President Donald Trump’s announcement that the conflict with Iran could conclude, potentially reopening the Strait of Hormuz to all, contingent on Iran reaching an agreement with the United States. Trump took to social media to express that if Iran fulfills the terms previously agreed upon, a resolution to the conflict, dubbed Epic Fury, would be achieved, leading to the highly efficient blockade allowing free passage through the Strait, including for Iran. However, he cautioned that failure to reach an agreement would result in intensified bombing efforts.
The President’s statement followed his decision to temporarily pause “Project Freedom,” an initiative aimed at escorting ships through the strategically crucial Strait of Hormuz, which has been under an Iranian blockade since February, contributing to a global energy crisis. Although the operation is paused to facilitate negotiations with Tehran, Trump made it clear that the blockade on Iranian ports would continue. In response, Iran’s Revolutionary Guards’ Navy announced on Wednesday that the safe transit through the strait would be ensured with the cessation of U.S. threats and the implementation of new procedures.
News of these developments caused a sharp decline in Brent crude oil prices, which plummeted by 11% to $97 a barrel, marking the first drop below $100 since April 22. Wholesale gas prices also fell, with the British June contract decreasing by 6.3% to 107.8p a therm. This decline in oil prices came amid reports that the White House was nearing a one-page memorandum of understanding with Iran to end the conflict, potentially setting the stage for more comprehensive nuclear discussions. However, oil prices regained some ground later, trading down by 7.3% to $101.83 a barrel after Iran dismissed the agreement as merely an “American wishlist.”
The Iranian Revolutionary Guards did not elaborate on the new procedures but expressed gratitude to shipowners and captains for complying with Iranian regulations while navigating the strait. Last week, oil prices had soared to $126 a barrel, the highest since 2022, as negotiations remained stalled and the U.S. blockade of Iranian ports was anticipated to persist for months.
European stock markets responded positively to these developments, with the UK’s FTSE 100 index climbing 2%, France’s Cac 40 increasing by 3%, and Germany’s Dax rising by 2.1%. Additionally, MSCI’s All-Country World Index reached a new record, gaining 1.6%, alongside record performances in its emerging markets benchmark and its broadest index of Asia Pacific shares outside Japan, which rose by 2.5%.