In a significant development, President Donald Trump declared that the conflict with Iran could come to a close, potentially leading to the reopening of the Strait of Hormuz. This announcement influenced global markets, with oil prices dropping and stock markets experiencing an upswing. Trump conveyed via social media that if Iran consents to the terms previously agreed upon, the conflict known as the “Epic Fury” would conclude, and the blockade ensuring the strait’s accessibility would be lifted for all, including Iran. However, he also cautioned that failure to secure a deal would result in intensified military action.
The president’s statement followed his decision to pause the “Project Freedom” initiative temporarily. This operation had been facilitating the safe passage of ships through the Strait of Hormuz, a critical channel for about 20% of the world’s oil supply, which Iran had blockaded since February, leading to a global energy crisis. Despite this pause meant to finalize negotiations with Tehran, Trump emphasized that the blockade on Iranian ports would continue. In response, Iran’s Revolutionary Guards’ Navy assured the safe transit of vessels through the strait once US threats ceased and new procedures were implemented, marking Iran’s initial reaction to the US’s tactical pause.
The announcement had an immediate impact on the oil market, with Brent crude oil prices plunging by 11% to $97 a barrel, marking the first instance of prices dipping below $100 since April 22. Wholesale gas prices also saw a decline, with the British June contract dropping by 6.3% to 107.8p a therm. This decline was further accelerated by reports indicating that the US and Iran were nearing a one-page memorandum of understanding to conclude the conflict, potentially paving the way for more comprehensive nuclear discussions. However, Iran described this as an “American wishlist” rather than a tangible reality, which led to oil prices recovering slightly, with Brent crude trading down 7.3% at $101.83 a barrel.
European stock markets reacted positively to these developments. The UK’s FTSE 100 index rose by 2%, while France’s Cac 40 and Germany’s Dax increased by 3% and 2.1%, respectively. In addition, MSCI’s All-Country World Index reached a new record high, climbing 1.6%, alongside similar gains in its emerging markets benchmark and its broad Asia Pacific shares index outside Japan, which advanced by 2.5%. These movements reflect the market’s optimism regarding the potential easing of geopolitical tensions and the prospects for improved international travel, buoyed by declining oil prices.