Oil prices saw a significant drop while stock markets experienced a rise following remarks by former President Donald Trump, indicating that the conflict with Iran could conclude, and the strategic Strait of Hormuz might be accessible to all if Tehran agrees to a deal with Washington. In a social media statement, Trump mentioned that if Iran consents to previously agreed terms, the conflict, referred to as ‘Epic Fury,’ would cease, and the blockade would permit open passage through the Hormuz Strait, including access for Iran. However, Trump cautioned that without an agreement, military actions would escalate, leading to bombings of greater intensity.
The situation arose as Trump announced a temporary halt to the ‘Project Freedom’ initiative, which was aimed at escorting vessels through the crucial waterway that facilitates approximately 20% of the global oil supply. The blockade by Iran, which started in late February, had instigated a worldwide energy crisis. Trump clarified that the pause was intended to finalize negotiations with Tehran, although the blockade on Iranian ports would persist. Meanwhile, the Iranian Revolutionary Guards’ Navy responded, stating that safe passage would be guaranteed with the cessation of US threats, though they did not detail the new procedures.
In response, the price of Brent crude oil, which had surged by 6% earlier in the week due to Middle East tensions, plummeted 11% to $97 a barrel, marking its first dip below $100 since April 22. Gas prices also decreased, with the British June contract dropping 6.3% to 107.8p per therm, while airline stocks climbed due to improved prospects for international travel. Oil prices had been declining earlier that day, and the trend accelerated after reports suggested the White House was nearing a memorandum of understanding with Iran to end the conflict, potentially laying the groundwork for future nuclear discussions.
Despite initial declines, oil prices slightly recovered later, reducing losses to 7.3% with trading at $101.83 a barrel after Iran dismissed the US proposal as mere wishes rather than reality. The statement from the Iranian Guards did not elaborate on the new passage procedures but expressed gratitude towards shipowners and captains for adhering to Iranian rules when navigating through the strait.
European stock markets showed positive momentum on Wednesday, with the UK’s FTSE 100 index increasing by 2%, France’s Cac 40 up by 3%, and Germany’s Dax rising by 2.1%. The MSCI’s All-Country World Index achieved a new peak with a 1.6% rise, alongside similar records for its emerging markets benchmark and its broadest index of Asia Pacific shares outside Japan, which surged by 2.5%. Meanwhile, oil prices had previously reached $126 a barrel the previous week, the highest since 2022, amid prolonged US port blockades and stalled peace negotiations.
