Oil prices took a hit while stock markets experienced an upswing following President Donald Trump’s announcement that the conflict with Iran could come to an end if Tehran agrees to a deal with Washington. Trump stated that the Strait of Hormuz, a critical passageway that handles around 20% of the world’s oil supply, would be open to all, including Iran, should an agreement be reached. However, he cautioned that if a deal isn’t secured, military actions would intensify beyond previous levels.
Trump’s remarks came amid his decision to temporarily halt the “Project Freedom” operation, which has been escorting ships through the strait since Iran’s blockade began in late February, sparking a global energy crisis. Although the operation is paused to finalize negotiations with Tehran, the blockade on Iranian ports remains active. Iran’s Revolutionary Guards’ Navy responded by assuring safe passage through the strait with forthcoming new procedures, though specifics were not provided.
The developments led to a significant drop in Brent crude oil prices, which had surged earlier in the week due to escalating tensions in the Middle East. The oil price plummeted 11%, falling below $100 a barrel for the first time since April 22. Similarly, wholesale gas prices saw a decline, and airline stocks benefited from the improved outlook for international travel. However, oil prices later regained some ground, trading down 7.3% at $101.83 per barrel after Iran dismissed the deal as an “American wishlist.”
Reports suggested that the White House was close to agreeing on a one-page memorandum of understanding to end hostilities with Iran, paving the way for more detailed nuclear discussions. This optimism was reflected in global stock markets, with European indices showing significant gains. The UK’s FTSE 100 index increased by 2%, France’s Cac 40 rose by 3%, and Germany’s Dax climbed 2.1%.
Globally, MSCI’s All-Country World Index reached a new high, climbing 1.6%. This growth was mirrored in its emerging markets benchmark and the broadest index of Asia Pacific shares outside Japan, which rose by 2.5%. These developments highlight the market’s positive response to potential de-escalation in the US-Iran conflict and the reopening of a critical oil trade route.