Oil prices took a dive while global stock markets saw an upswing after U.S. President Donald Trump indicated a potential resolution to the conflict with Iran. Trump announced on social media that the war could end and the strategically crucial Strait of Hormuz would be accessible to all, should Tehran agree to a deal with Washington. He stated, “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.”
The president warned, however, that if Iran failed to reach an agreement, military actions would escalate, saying, “the bombing starts” and it would be at a “much higher level and intensity than it was before.” This announcement followed his decision to pause briefly the “Project Freedom” operation, which involved escorting ships through the Hormuz Strait. This waterway, responsible for about 20% of global oil supply, has been blockaded by Iran since late February, leading to a significant energy crisis worldwide. Trump mentioned that the pause was to facilitate finalizing a deal with Tehran, though the blockade of Iranian ports would persist.
The response from Iran came through its Revolutionary Guards’ Navy, which claimed that safe passage through the strait would be assured with the cessation of U.S. threats and new measures in place. The news initially caused Brent crude oil prices to drop significantly by 11%, reaching as low as $97 per barrel, marking its first dip below $100 since late April. Wholesale gas prices also fell, with the British June contract decreasing by 6.3%. The oil price decline accelerated after reports suggested the White House was nearing a one-page memorandum of understanding with Iran to end the war, potentially setting the stage for more comprehensive nuclear talks.
Despite the initial fall, oil prices later regained some ground, with Brent crude trading down 7.3% at $101.83 as Iran dismissed the U.S. proposals as merely an “American wishlist” rather than a reality. The Revolutionary Guards’ statement did not elaborate on the new procedures but expressed gratitude to shipowners and captains for adhering to Iranian regulations while navigating the strait. Last week, oil prices had soared to $126 a barrel, their highest since 2022, following Trump’s comments that the U.S. blockade of Iranian ports could be prolonged for months amid stalled peace negotiations.
European stock markets responded positively to these developments, with the UK’s FTSE 100 index rising by 2%, France’s Cac 40 climbing 3%, and Germany’s Dax increasing by 2.1%. MSCI’s All-Country World Index also rose by 1.6% to a record high, alongside similar gains for its emerging markets benchmark and its broadest index of Asia Pacific shares outside Japan, which increased by 2.5%.