Oil prices experienced a sharp decline while stock markets saw gains following a statement by Donald Trump suggesting that the conflict with Iran could conclude and the Strait of Hormuz might be accessible to all, provided Tehran agrees to a deal with Washington. In a social media post, the US president remarked, “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.” Trump further cautioned that without an accord, “the bombing starts” with a potential increase in intensity.
This development follows Trump’s decision to temporarily halt his “Project Freedom” operation, which involved escorting ships through the Strait of Hormuz. The strait, a crucial conduit for about one-fifth of the world’s oil supplies, has faced a blockade by Iran since late February, sparking a global energy crisis. Although Trump paused this operation to finalize discussions with Tehran, he noted that the blockade on Iranian ports would persist. Iran’s initial response came through the Revolutionary Guards’ Navy, which assured safe passage through the strait as US threats wane, although it did not specify the new procedures in place.
The news led to a significant drop in Brent crude oil prices, which had surged up to 6% earlier in the week due to escalating tensions in the Middle East. Prices plummeted by 11% to as low as $97 a barrel, marking their first dip below $100 since April 22. Wholesale gas prices also saw a decline, with the British June contract falling 6.3% to 107.8p a therm, while airline stocks benefited from the improved outlook for international travel. Reports indicated that the White House was nearing a one-page memorandum of understanding to cease hostilities with Iran, aiming to establish a framework for detailed nuclear discussions, according to sources including two US officials.
Despite the initial plunge, oil prices later moderated, trading down 7.3% at $101.83 a barrel, as Iran dismissed the prospect as an “American wishlist [and] not a reality.” The statement from the Guards expressed gratitude to shipowners and captains for adhering to Iranian regulations but did not elaborate on the newly implemented procedures. Previously, oil prices had surged to $126 a barrel, a peak not seen since 2022, after Trump’s comments about a prolonged US blockade of Iranian ports with stalled peace talks.
European stock markets reacted positively on Wednesday, with the UK’s FTSE 100 index increasing by 2%, France’s Cac 40 by 3%, and Germany’s Dax by 2.1%. Additionally, MSCI’s All-Country World Index rose 1.6%, reaching a new record alongside its benchmarks for emerging markets and Asia Pacific shares outside Japan, which climbed by 2.5%.