Global oil prices took a downturn and stock markets experienced a boost following President Donald Trump’s announcement regarding the conflict with Iran. Trump suggested that if Tehran reached an agreement with Washington, the longstanding tensions would cease, and the strategic Strait of Hormuz would be accessible to all nations. In a social media post, 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.”
However, Trump issued a stern warning that should Iran fail to negotiate a deal, military actions would escalate, with bombings becoming more intense than before. This declaration came on the heels of Trump’s decision to temporarily halt his “Project Freedom” operation, which involved escorting vessels through the Strait of Hormuz. This waterway, crucial for transporting approximately 20% of the world’s oil supply, has been under Iranian blockade since late February, contributing to a global energy crisis. Despite the pause, Trump’s blockade on Iranian ports remains intact.
The Iranian Revolutionary Guards’ Navy responded by indicating that safe passage through the strait would be assured as US threats diminished and new measures were implemented. This statement marked Iran’s initial response to the US suspension of operations aimed at aiding stranded ships. In reaction to these developments, Brent crude oil prices, which had surged by up to 6% earlier in the week due to Middle Eastern conflicts, plummeted 11%, dropping to $97 a barrel for the first time since April 22. Similarly, European wholesale gas prices saw a decline, with the British June contract decreasing by 6.3% to 107.8p per therm, while airline stocks gained on the improved outlook for international travel.
Despite a morning dip in crude prices, a report suggesting that the White House was nearing a memorandum of understanding to conclude the conflict with Iran led to a further decline. The report mentioned that both parties were preparing to establish a framework for more comprehensive nuclear discussions, citing multiple sources, including US officials. Nonetheless, oil prices partially recovered later, with Brent crude trading down by 7.3% at $101.83 per barrel, following Iran’s dismissal of the report as an “American wishlist [and] not a reality.”
European stock markets saw a significant rally on Wednesday, with the UK’s FTSE 100 index rising by 2%, France’s Cac 40 climbing 3%, and Germany’s Dax increasing by 2.1%. The MSCI’s All-Country World Index reached a new record, rising by 1.6%, alongside similar achievements for its emerging markets benchmark and the broadest index of Asia Pacific shares outside Japan, which saw a 2.5% increase. Meanwhile, oil prices had previously soared to $126 per barrel last week, their highest since 2022, after Trump indicated that the US blockade of Iranian ports could persist for months amid stalled peace negotiations.
