Oil prices have declined while stock markets experienced a rise following President Donald Trump’s announcement regarding the potential end of hostilities with Iran and the promise of open access to the Strait of Hormuz, contingent on Iran reaching an agreement with the United States. Trump took to social media to suggest that if Tehran agrees to the terms previously outlined, the conflict known as Epic Fury would conclude, allowing the strategic waterway, crucial for global oil transport, to be accessible to all, including Iran. However, Trump warned that failure to reach an agreement would lead to intensified bombing.
This development follows Trump’s decision to temporarily suspend his “Project Freedom” initiative, which involved escorting vessels through the Strait of Hormuz. This narrow passage is vital as it handles around 20% of the world’s oil supply but has been under an Iranian blockade since late February, exacerbating a global energy crisis. Although the escort operations are on hold to facilitate negotiations with Tehran, Trump emphasized that the blockade of Iranian ports would remain intact. In response, the Revolutionary Guards’ Navy expressed confidence in the security of transit through the strait, citing the end of U.S. threats and the implementation of new procedures.
The announcement prompted a notable drop in Brent crude oil prices, which had surged earlier in the week due to tensions in the Middle East. The price fell by 11%, reaching a low of $97 per barrel, marking the first dip below $100 since April 22. Wholesale gas prices also decreased, with the British June contract falling 6.3% to 107.8p a therm, and airline stocks climbed as prospects for international travel improved. The decline in oil prices was further accelerated by reports hinting at a possible agreement between the U.S. and Iran to draft a memorandum of understanding aimed at concluding the conflict, paving the way for more detailed nuclear discussions.
However, the drop in oil prices was partially reversed later in the day, as they settled at a 7.3% decrease to $101.83 per barrel, following Iran’s dismissal of the proposed agreement as an “American wishlist” rather than a reality. The Revolutionary Guards’ statement did not elaborate on the new measures but expressed gratitude to shipowners and captains for adhering to Iranian regulations while navigating the strait.
Last week, oil prices had surged to $126 per barrel, the highest since 2022, amid concerns over the potential prolongation of the U.S. blockade of Iranian ports and stalled peace negotiations. In contrast, European stock markets saw gains on Wednesday, with the UK’s FTSE 100 index rising by 2%, France’s Cac 40 increasing by 3%, and Germany’s Dax climbing by 2.1%. Additionally, MSCI’s All-Country World Index reached a new peak, alongside milestones for its emerging markets benchmark and Asia Pacific shares index outside Japan, which rose by 2.5%.