Amid tensions with Iran, President Donald Trump announced that the conflict could be resolved if Tehran agrees to a deal with Washington, leading to a decline in oil prices and a rise in stock markets. In a social media post, Trump stated that if Iran upholds its agreements, the military operation, known as Epic Fury, could conclude, and the strategic Strait of Hormuz would be accessible to all, including Iran. However, he cautioned that failure to reach an agreement would result in intensified military actions.
The backdrop to these developments is the ongoing “Project Freedom,” an initiative by the U.S. to escort ships through the Strait of Hormuz, a vital passageway for approximately 20% of the world’s oil supply. This operation was initiated following Iran’s blockade of the strait in late February, which sparked a global energy crisis. Trump declared a temporary halt to the operation to focus on negotiating a deal with Tehran, though he emphasized that the blockade of Iranian ports would persist.
Iran’s initial response to the U.S. pausing its operations was cautiously optimistic, with the Revolutionary Guards’ Navy indicating that safe passage through the strait could be assured with the cessation of U.S. threats. This statement came as Brent crude oil, which had surged by 6% following recent Middle Eastern conflicts, plummeted by 11% to $97 per barrel, marking its first drop below $100 since April 22.
The market reaction extended beyond oil prices, as wholesale gas prices in the UK saw a decline, and airline stocks experienced a boost due to the potential for improved international travel conditions. Reports suggested progress towards a preliminary memorandum of understanding between the U.S. and Iran, aimed at ending hostilities and establishing a framework for future nuclear discussions. However, Iran dismissed these reports as mere “American wishlist” rather than reality, causing oil prices to recover slightly, closing at $101.83 per barrel.
In the wake of these geopolitical developments, European stock markets experienced a significant upswing. The FTSE 100 index in the UK climbed by 2%, France’s Cac 40 increased by 3%, and Germany’s Dax rose by 2.1%. Globally, the MSCI All-Country World Index reached a new peak, alongside gains in emerging markets and the Asia Pacific shares index, excluding Japan, which saw a 2.5% rise.