Stock markets saw a rise and oil prices dropped following President Donald Trump’s announcement regarding the potential conclusion of the conflict with Iran. Trump indicated that the Strait of Hormuz would remain accessible if Tehran agreed to a deal with Washington. In a social media post, Trump stated that if Iran meets the agreed terms, the conflict dubbed “Epic Fury” would cease, allowing the strait to be open to all, including Iran. Nonetheless, he warned that failure to reach a deal would result in intensified bombings.
This development emerged as Trump decided to temporarily halt “Project Freedom,” an initiative aimed at escorting vessels through the strategically significant Strait of Hormuz—responsible for about 20% of global oil transport—which has been under Iranian blockade since late February, exacerbating a global energy crisis. While suspending the operation, Trump maintained that the blockade on Iranian ports remains in effect. Iran’s Revolutionary Guards’ Navy responded by stating that safe passage through the strait would be guaranteed with the cessation of US threats, marking Iran’s initial response to the US’s pause in operations.
The news led to a sharp decline in Brent crude oil prices, which fell 11% to $97 a barrel, marking its first dip below $100 since April 22. Despite this, oil prices later recovered slightly, trading at $101.83 a barrel, after Iran dismissed the US proposal as merely an “American wishlist.” Meanwhile, wholesale gas prices experienced a decline, with the British June contract dropping 6.3% to 107.8p a therm. Airline stocks benefited from the improved outlook for international travel. The decline in oil prices was further accelerated by reports suggesting that the White House was nearing a one-page memorandum of understanding with Iran to end the conflict, setting the stage for detailed nuclear negotiations.
Despite the initial decline, oil prices had previously surged to $126 a barrel the prior week, reaching the highest level since 2022, on concerns that the US blockade of Iranian ports might extend for several months amid stalled peace negotiations. The recent developments have led to a rally in European stock markets, with notable increases in indices such as the UK’s FTSE 100, France’s Cac 40, and Germany’s Dax, which rose by 2%, 3%, and 2.1% respectively.
Globally, MSCI’s All-Country World Index climbed by 1.6% to reach a new record, accompanied by similar gains for its emerging markets benchmark and the broadest index of Asia Pacific shares outside Japan, which advanced by 2.5%. The financial markets appear to be reacting positively to the potential easing of tensions in the Middle East, despite the uncertainty surrounding the finalization of an agreement between the US and Iran.