In a significant development, oil prices have decreased while stock markets have experienced an upswing following President Donald Trump’s announcement regarding the potential resolution of the conflict with Iran. According to Trump, if Tehran agrees to a deal with Washington, the ongoing tensions could conclude, leading to the opening of the Strait of Hormuz, a critical passage for global oil shipments. The U.S. president stated on social media that with an agreement in place, the operation known as Epic Fury could end, allowing the strait to be accessible to all, including Iran.
However, Trump warned of heightened military action if Iran fails to reach an agreement, indicating that bombardment would resume with increased severity. This statement came after Trump decided to temporarily halt “Project Freedom,” an operation aimed at escorting ships through the strategically important strait, which has been under an Iranian blockade since February, causing a significant energy crisis worldwide. Despite the pause, Trump emphasized that the blockade on Iranian ports would persist. In response, Iran’s Revolutionary Guards’ Navy assured that safe passage through the strait would be maintained with U.S. threats diminishing and new measures being implemented.
The initial reaction to the news saw Brent crude oil prices plummet by 11%, reaching as low as $97 per barrel, marking the first time the price dropped below $100 since April 22. Additionally, wholesale gas prices saw a decline, with the British June contract falling 6.3% to 107.8p a therm, while airline stocks benefited from improved prospects for international travel. The decline in oil prices accelerated following reports suggesting the White House was nearing an agreement with Iran, potentially leading to a one-page memorandum of understanding to conclude the war. However, Iran countered these claims, describing them as an “American wishlist” rather than a reality.
As the day progressed, oil prices partially recovered, trading down 7.3% at $101.83 a barrel. The statement from Iran’s Revolutionary Guards did not detail the new procedures for the strait but expressed gratitude to shipowners and captains for adhering to Iranian regulations in the waterway. Previously, oil prices had surged to $126 a barrel, their highest since 2022, in response to Trump’s remarks about the possibility of a prolonged U.S. blockade on Iranian ports amid stalled peace negotiations.
Meanwhile, European stock markets witnessed a rally on Wednesday, with the UK’s FTSE 100 index rising by 2%, France’s Cac 40 increasing by 3%, and Germany’s Dax climbing 2.1%. Globally, MSCI’s All-Country World Index achieved a new record, increasing by 1.6%, alongside notable gains in its emerging markets benchmark and the broadest index of Asia Pacific shares outside Japan, which rose by 2.5%.