Oil prices experienced a decline while stock markets saw an upswing following President Donald Trump’s announcement that the conflict with Iran could conclude, potentially reopening the Strait of Hormuz to all vessels if Tehran agrees to terms with Washington. The U.S. president took to social media, stating that assuming Iran adheres to the agreed terms, the military operation known as “Epic Fury” would cease, and the highly effective blockade would be lifted, allowing the Strait of Hormuz to be accessible to all, including Iran.
However, Trump cautioned that failure by Iran to reach an agreement would result in renewed military actions, with increased levels of intensity compared to previous engagements. This announcement came on the heels of Trump’s decision to temporarily halt “Project Freedom,” an operation designed to escort ships through the strategically critical strait, which facilitates about 20% of global oil supplies. The strait had been under Iranian blockade since late February, contributing to a worldwide energy crisis.
Trump’s decision to pause operations aimed at assisting stranded ships in the strait was intended to create a window for finalizing discussions with Tehran, though he maintained that the blockade on Iranian ports would persist. In response, Iran’s Revolutionary Guards’ Navy remarked, through state media, that safe passage could be expected as U.S. threats diminish and new protocols come into play. This marked Iran’s initial response to the cessation of U.S. operations in the region.
The announcement initially drove Brent crude oil prices down by 11%, reaching as low as $97 a barrel, marking its first drop below $100 since April 22. The British wholesale gas prices also decreased, with the June contract falling by 6.3% to 107.8p a therm, and airline stocks surged due to improved prospects for international travel. Earlier, crude prices had been declining, with momentum gathering pace after reports indicated that the U.S. government was nearing a one-page memorandum of understanding with Iran to end the conflict, according to four sources, including two U.S. officials.
Despite the initial drop, oil prices later recovered some of their losses, trading down 7.3% at $101.83 per barrel as Iran dismissed the proposed terms as an “American wishlist” rather than an actual agreement. The Revolutionary Guards did not detail the new procedures for the strait but expressed gratitude to shipowners and captains for complying with Iranian regulations. Previously, oil prices had surged to $126 per barrel, the highest since 2022, following Trump’s comments about the potential duration of the U.S. blockade and stalled peace negotiations. Meanwhile, European stock markets experienced significant gains, with the UK’s FTSE 100, France’s Cac 40, and Germany’s Dax indices all showing notable increases, and MSCI’s global and regional indices reaching new records.