Oil prices saw a significant decline while stock markets experienced a rise following President Donald Trump’s announcement that the conflict with Iran could be resolved and the strategic Strait of Hormuz would be accessible to all, contingent on a potential agreement with Tehran. On social media, Trump 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.” He added that failure to reach an agreement would result in escalated bombing, with increased intensity compared to previous actions.
In a move aimed at facilitating negotiations, Trump declared a temporary halt to “Project Freedom,” an operation intended to escort ships through the Hormuz Strait. The strait, accounting for about 20% of the global oil supply, had been under an Iranian blockade since late February, exacerbating the global energy crisis. Although the operation was paused, Trump confirmed that the blockade of Iranian ports would persist. In response, Iran’s Revolutionary Guards’ Navy assured safe passage through the strait, indicating that new procedures were in place as US threats diminished. This comment marked Iran’s initial response to the US’s temporary cessation of operations to aid stranded vessels.
The initial news led to a sharp drop in Brent crude oil prices, which plummeted 11% to $97 a barrel, marking the first instance of prices falling below $100 since April 22. Wholesale gas prices also decreased, with the British June contract dropping by 6.3% to 107.8p a therm. Airline stocks benefited from the improved outlook for international travel. The decline in crude prices accelerated after reports suggested the White House was nearing a one-page memorandum of understanding with Iran to end the conflict, potentially setting a framework for more detailed nuclear discussions. However, Iran dismissed it as an “American wishlist [and] not a reality,” resulting in oil prices paring losses later in the day to $101.83 a barrel.
The oil price had previously surged to $126 a barrel, its highest level since 2022, following Trump’s indication that the US blockade on Iranian ports could extend for months amid stalled peace talks. European stock markets responded positively on Wednesday, with the UK’s FTSE 100 index climbing 2%, France’s Cac 40 increasing by 3%, and Germany’s Dax rising by 2.1%. Meanwhile, MSCI’s All-Country World Index reached a new record, rising 1.6%, alongside milestones for its emerging markets benchmark and its broadest index of Asia Pacific shares outside Japan, which saw a 2.5% rise.