In a significant development affecting global markets, oil prices dropped while stock markets surged after President Donald Trump indicated a potential resolution to the conflict with Iran. Trump announced that the war could conclude and the Strait of Hormuz would be accessible to all if Iran agreed to a deal with the United States. He took to social media to state, “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 cautioned that failure to reach an agreement would result in intensified military actions.
The president’s remarks followed his decision to temporarily halt “Project Freedom,” an initiative to escort ships through the strategically critical Strait of Hormuz, which has been under an Iranian blockade since February. This blockade has significantly impacted global oil supply, as the strait is responsible for transporting about 20% of the world’s oil. While Trump paused the operation to negotiate with Tehran, he maintained the blockade on Iranian ports. In response, Iran’s Revolutionary Guards’ Navy assured the safe passage of ships, declaring that US threats were diminishing and new protocols were being established.
The initial reaction to Trump’s announcement saw Brent crude oil prices plunge by 11%, reaching as low as $97 a barrel, marking the first time they dipped below $100 since April 22. Additionally, wholesale gas prices declined, with the British June contract falling 6.3% to 107.8p a therm. The news also positively impacted airline stocks, buoyed by the prospect of improved international travel. The drop in crude prices accelerated following reports that the US was nearing a one-page memorandum of understanding to potentially end hostilities with Iran, setting the stage for more comprehensive nuclear negotiations.
Despite these developments, oil prices later rebounded slightly, trading down 7.3% at $101.83 a barrel as Iran dismissed the US proposal as an “American wishlist [and] not a reality.” The Revolutionary Guards did not elaborate on their new measures for the strait but expressed gratitude to shipowners and captains who adhered to Iranian regulations. Last week, oil prices had reached $126 a barrel, their highest since 2022, amid ongoing US port blockades and stalled peace talks.
Meanwhile, European stock markets saw significant gains on Wednesday. The UK’s FTSE 100 index increased by 2%, France’s Cac 40 rose by 3%, and Germany’s Dax was up 2.1%. The MSCI’s All-Country World Index climbed 1.6% to a new record, with similar achievements seen in its emerging markets benchmark and its broadest index of Asia Pacific shares outside Japan, which rose by 2.5%.