Oil prices dropped while stock markets gained as President Donald Trump announced potential resolution prospects in the conflict with Iran, suggesting the Strait of Hormuz would be accessible if Tehran agrees to a deal with Washington. Trump communicated via social media, indicating that should Iran comply with previously agreed terms, his military operation, dubbed Epic Fury, would conclude, and the blockade would allow the strait’s reopening to all nations, including Iran. However, he also cautioned that if no agreement is reached, military actions would escalate with heightened intensity.
The president’s announcement followed his decision to temporarily halt “Project Freedom,” an operation aimed at escorting ships through the strategically crucial Strait of Hormuz, a vital passage carrying about 20% of the world’s oil supplies that has been under Iranian blockade since late February. This blockade has significantly contributed to a global energy crisis. While Trump paused the operation to negotiate with Tehran, he maintained the blockade on Iranian ports. Iran responded, stating that safe passage through the strait would be assured with the cessation of US threats and new procedures to be implemented, although details of these procedures were not specified.
As a result of these developments, Brent crude oil, which had surged earlier in the week due to Middle Eastern tensions, plummeted by 11% to $97 a barrel, marking its first dip below $100 since April. Wholesale gas prices also declined, with the British June contract experiencing a 6.3% drop. Concurrently, airline stocks rose, buoyed by the improved outlook for international travel. The decline in crude prices accelerated following a report suggesting the White House was nearing a memorandum of understanding to conclude the conflict with Iran, potentially setting the stage for more comprehensive nuclear negotiations.
However, later in the day, oil prices partially recovered, with Brent crude trading down 7.3% at $101.83 a barrel after Iran dismissed the possibility of an agreement, describing the situation as an “American wishlist” rather than reality. Despite the uncertainty, European stock markets experienced notable gains; the UK’s FTSE 100 index increased by 2%, France’s Cac 40 rose 3%, and Germany’s Dax climbed by 2.1%. Additionally, MSCI’s All-Country World Index reached a new record, along with similar achievements for its emerging markets benchmark and its broad index of Asia Pacific shares outside Japan, which saw a 2.5% increase.