Stock markets experienced a boost and oil prices dropped following President Donald Trump’s announcement that the conflict with Iran could be resolved if Tehran agrees to a deal with Washington. Trump indicated that the strategic Strait of Hormuz would be accessible to all, including Iran, under such an agreement. However, he warned that failure to reach a deal would result in intensified military action against Iran. This news follows Trump’s decision to temporarily halt “Project Freedom,” an operation aimed at escorting ships through the strait, which has been under Iranian blockade since February, causing global energy disruptions.
Trump stated that the pause in the operation is intended to finalize negotiations with Iran, while maintaining the blockade of Iranian ports. The Revolutionary Guards’ Navy responded by assuring safe passage through the strait, with US threats diminishing and new procedures anticipated. This development caused Brent crude oil prices, which had surged earlier in the week, to plummet by 11% to $97 a barrel, marking the first time prices fell below $100 since April. Simultaneously, wholesale gas prices declined, and airline stocks rose due to improved international travel prospects.
Despite the initial drop, oil prices later rebounded slightly, ending the day with a 7.3% decrease at $101.83 a barrel, as Iran dismissed the US proposal as an “American wishlist” rather than a reality. The earlier report that the US and Iran were moving towards a memorandum of understanding to cease hostilities had contributed to the market fluctuations. The report suggested both nations might establish a framework for more comprehensive nuclear discussions.
The Revolutionary Guards did not detail the new procedures for the strait but expressed appreciation to shipowners and captains for adhering to Iranian regulations. Last week, oil prices had reached $126 a barrel, their highest since 2022, amid concerns that US port blockades on Iran could persist and peace talks remained at a standstill.
European stock markets responded positively to the developments. The UK’s FTSE 100 index increased by 2%, while France’s Cac 40 rose by 3%, and Germany’s Dax climbed 2.1%. The MSCI’s All-Country World Index also saw a record rise of 1.6%, along with its emerging markets and Asia Pacific shares benchmarks outside Japan, which increased by 2.5%.