Global markets reacted as oil prices dropped and stock markets surged following U.S. President Donald Trump’s announcement that the conflict with Iran might conclude, allowing the Strait of Hormuz to reopen if Tehran reached an agreement with Washington. Trump expressed optimism on social media, stating that the “Epic Fury” would end if Iran fulfilled its commitments, thereby ensuring the strait remained accessible to all nations, including Iran. However, he cautioned that failure to reach a deal would lead to intensified military action.
The declaration from Trump came after he decided to temporarily halt “Project Freedom,” a U.S. operation meant to provide safe passage for ships traversing the Hormuz Strait, a critical channel for about 20% of the world’s oil supply. This waterway had been under Iranian blockade since late February, exacerbating a global energy crisis. While Trump paused the operation to negotiate with Tehran, he maintained that the blockade of Iranian ports would persist. In response, Iran’s Revolutionary Guards’ Navy indicated that new measures would ensure secure transit through the strait, marking their first official reaction to the U.S. pause.
The initial news triggered a sharp decline in Brent crude oil prices, which fell 11% to $97 a barrel, marking its first drop below $100 since April 22. This decline followed a surge of up to 6% earlier in the week due to Middle Eastern tensions. Wholesale gas prices also decreased, with the British June contract dropping 6.3% to 107.8p a therm, while airline stocks saw gains with the prospect of improved international travel. Reports suggested that the White House was nearing a preliminary agreement to end the conflict with Iran, which further accelerated the decline in oil prices. However, Iran dismissed it as an “American wishlist” rather than a feasible plan.
Despite initial losses, oil prices moderated later in the day, with Brent crude trading down by 7.3% at $101.83 a barrel. The Revolutionary Guards did not elaborate on the new procedures for the strait but expressed gratitude to shipowners and captains for adhering to Iranian regulations. Previously, oil prices had peaked at $126 a barrel last week, the highest since 2022, amid concerns over prolonged U.S. port blockades and stalled peace negotiations.
European stock markets showed a positive trend on Wednesday, with the UK’s FTSE 100 index climbing 2%, France’s Cac 40 up by 3%, and Germany’s Dax increasing by 2.1%. Additionally, MSCI’s All-Country World Index rose 1.6% to a new record, alongside significant gains in its emerging markets benchmark and the broadest index of Asia Pacific shares outside Japan, which went up by 2.5%.