In a significant development, oil prices experienced a sharp decline while global stock markets saw an uptick following remarks from former U.S. President Donald Trump, who suggested an end to hostilities with Iran could be on the horizon. Trump indicated that the Strait of Hormuz would be accessible to all nations, contingent on Iran striking a deal with Washington. On social media, he 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, he warned that failure to reach an agreement would result in escalated military actions.
This announcement followed Trump’s decision to temporarily halt “Project Freedom,” a military operation designed to escort ships through the strategically vital Strait of Hormuz, which is responsible for the transit of about 20% of the world’s oil supply. The strait has been under an Iranian blockade since February, contributing to a global energy crisis. Despite the pause, Trump noted that the blockade of Iranian ports would persist. In response, Iran’s Revolutionary Guards’ Navy assured that with the cessation of U.S. threats, safe passage through the strait would be guaranteed, although the specifics of new operating procedures remained undisclosed.
The news had an immediate impact on the markets, with Brent crude oil prices plummeting by 11% to $97 a barrel, marking the first time they dipped below $100 since April 22. This decline followed a peak of $126 a barrel last week, which was the highest since 2022, amid prolonged U.S.-Iran tensions. Additionally, wholesale gas prices in the UK saw a decrease, with the June contract dropping 6.3% to 107.8p per therm. The potential for eased travel restrictions buoyed airline stocks, contributing to the overall uplift in market sentiment.
Reports suggested that the White House was nearing a preliminary agreement with Tehran, potentially setting the stage for comprehensive nuclear discussions. This raised hopes for a peaceful resolution, although Iran dismissed the notion as merely an “American wishlist.” Despite this, the market remained optimistic, with European stock exchanges showing gains; the UK’s FTSE 100 increased by 2%, France’s Cac 40 by 3%, and Germany’s Dax by 2.1%. Globally, MSCI’s All-Country World Index achieved a new record, climbing 1.6% alongside its emerging markets and Asia Pacific benchmarks.