Oil prices plunged and global stock markets surged following President Donald Trump’s announcement that the conflict with Iran could come to an end if Tehran agrees to a deal with Washington. Trump took to social media to suggest that the strait of Hormuz, a crucial passage for global oil supplies, would be “open to all,” including Iran, if an agreement is reached. However, he warned that the situation could escalate with increased bombings if no deal is struck.
The president’s statement came shortly after he decided to temporarily halt the “Project Freedom” operation, which involved escorting ships through the strait that Iran has blockaded since February. This blockade has contributed to a global energy crisis, as the strait facilitates the transport of about a fifth of the world’s oil supplies. While Trump paused the operation to finalize a potential deal with Iran, he confirmed that the blockade of Iranian ports would persist. In response, the Revolutionary Guards’ Navy indicated that safe transit through the strait would be assured with the cessation of US threats and the implementation of new procedures.
Following Trump’s announcement, Brent crude oil prices, which had previously risen by up to 6% earlier in the week due to Middle Eastern tensions, plummeted by 11%, reaching a low of $97 a barrel—the first drop below $100 since April 22. Wholesale gas prices also declined, with the British June contract dropping 6.3% to 107.8p a therm. This positive shift in the energy market also buoyed airline stocks, reflecting an improved outlook for international travel. The Axios news site reported that the White House was nearing an agreement with Iran on a one-page memorandum of understanding to end the conflict, which further fueled market optimism. However, oil prices later corrected slightly, trading at $101.83 a barrel as Iran dismissed the US proposal as an “American wishlist” rather than a reality.
Despite the initial drop in oil prices, the Revolutionary Guards’ statement did not clarify the specifics of the new procedures for the strait but expressed gratitude to shipowners and captains for complying with Iranian regulations during their transits. The recent volatility in oil prices had seen them peak at $126 a barrel last week, their highest since 2022, amid concerns that the US blockade of Iranian ports could continue for several months without progress in peace talks.
European stock markets responded positively to these developments, with the UK’s FTSE 100 index climbing 2%, France’s Cac 40 up by 3%, and Germany’s Dax increasing by 2.1%. Additionally, MSCI’s All-Country World Index rose 1.6% to a new record, accompanied by milestones in its emerging markets benchmark and its broadest index of Asia Pacific shares outside Japan, which rose by 2.5%.