Global oil prices dropped sharply, and stock markets experienced gains following a statement by former President Donald Trump suggesting an end to the conflict with Iran and the reopening of the Strait of Hormuz. Trump indicated that if Tehran agreed to a deal with Washington, the long-standing tensions would cease, and the strategic waterway, crucial for global oil transit, would be accessible to all, including Iran.
Through social media, Trump remarked, “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 cautioned that failure to reach a deal would result in intensified military actions, with potential bombings at a heightened level of severity.
These developments followed Trump’s announcement of a temporary halt to the “Project Freedom” operation, which had been safeguarding maritime traffic through the Strait of Hormuz. This strait, a critical channel for nearly 20% of the world’s oil, has been under an Iranian blockade since February, leading to an energy crisis. While Trump paused the operation to negotiate with Tehran, he maintained the blockade of Iranian ports. In response, Iran’s Revolutionary Guards’ Navy stated that safe passage through the strait would be assured, as US threats were diminishing and new protocols were being implemented. This announcement marked Iran’s initial response to the US move to pause its operations.
Oil prices, which had surged due to recent Middle Eastern conflicts, took a significant hit with Brent crude experiencing an 11% drop to $97 a barrel—the first dip below $100 since April 22. Meanwhile, wholesale gas prices also declined, and airline stocks rose, buoyed by prospects of improved international travel. The drop in oil prices gained momentum following a report that the US was nearing a one-page memorandum of understanding with Iran to conclude the conflict, potentially setting the stage for comprehensive nuclear negotiations. Despite this, oil prices later rebounded slightly, trading down 7.3% at $101.83 a barrel, as Iran dismissed the US proposal as merely aspirational.
European stock markets responded positively, with the UK’s FTSE 100 index climbing 2%, France’s Cac 40 rising 3%, and Germany’s Dax advancing 2.1%. The MSCI’s All-Country World Index also reached a new peak, alongside similar records for its emerging markets benchmark and its broadest index of Asia Pacific shares outside Japan, which increased by 2.5%. This market optimism contrasted with the previous week’s scenario when oil prices hit $126 a barrel amid concerns that the US blockade of Iranian ports could persist and peace talks remained stalled.
