Global oil prices declined, while stock markets saw an upswing following U.S. President Donald Trump’s announcement that tensions with Iran could be resolved, potentially reopening the Strait of Hormuz to international passage. Trump suggested that a resolution could be achieved if Iran agrees to terms previously discussed with Washington. In his statement on social media, he 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, Trump warned that failure to reach an agreement could result in intensified military actions.
The president’s comments came on the heels of his decision to temporarily halt the “Project Freedom” initiative, which involves escorting maritime vessels through the strategic waterway. The Strait of Hormuz, vital for the global oil supply as it handles approximately 20% of the world’s oil, has been under an Iranian blockade since late February, leading to an international energy crisis. Trump indicated that this pause was to facilitate negotiations with Tehran, although he emphasized that the blockade on Iranian ports would continue. In response, Iran’s Revolutionary Guards’ Navy stated on Wednesday that it would ensure safe passage through the strait, marking Iran’s initial reaction to the U.S. pausing its escort operations.
The announcement initially caused Brent crude oil prices to plummet by 11% to $97 per barrel, a significant drop below the $100 mark for the first time since April 22. The decline followed a surge earlier in the week due to recent Middle Eastern conflicts. Additionally, wholesale gas prices in the UK saw a reduction, and airline stocks benefited from optimistic prospects for international travel. The oil market had already been experiencing a downturn on Wednesday morning, with further decreases catalyzed by reports suggesting that the U.S. and Iran might be nearing a preliminary agreement to cease hostilities. This potential agreement could pave the way for more comprehensive nuclear discussions.
Despite the initial drop, oil prices later moderated, settling at $101.83 per barrel, down by 7.3%. Iran cast doubt on the immediacy of an agreement, referring to it as an “American wishlist [and] not a reality,” which contributed to the partial recovery in oil prices. The Revolutionary Guards did not elaborate on the new procedures for transit through the strait, although they expressed appreciation for those abiding by Iranian regulations.
Stock markets in Europe responded positively to the developments. The UK’s FTSE 100 increased by 2%, France’s Cac 40 climbed 3%, and Germany’s Dax rose by 2.1%. In a broader context, MSCI’s All-Country World Index achieved a new record, rising by 1.6%, alongside similar peaks for its emerging markets index and the broad Asia Pacific shares index, excluding Japan, which rose by 2.5%. These market movements reflect growing optimism about the potential easing of geopolitical tensions.