In a significant shift that impacted global markets, Donald Trump announced the potential end of hostilities with Iran, suggesting that the Strait of Hormuz could soon be accessible to all, contingent on a deal with Tehran. The U.S. president took to social media to indicate a possible cessation of what he termed the “Epic Fury,” provided Iran adheres to previously discussed terms. Trump noted that this would open the vital shipping passage to global traffic, including Iranian vessels. However, he also warned that failure to reach an agreement could lead to intensified military action against Iran.
This development follows Trump’s decision to temporarily halt his “Project Freedom” initiative, which involved escorting ships through the strategically crucial Strait of Hormuz. The strait, responsible for the transit of roughly 20% of the world’s oil, had been under Iranian blockade since February, exacerbating a worldwide energy crisis. Although the escort operation is paused to facilitate negotiations, Trump emphasized that the blockade on Iranian ports would continue unabated. Meanwhile, Iran’s Revolutionary Guards expressed readiness to ensure safe passage through the strait, marking their first response to the U.S. operational pause.
Market reactions were swift, with Brent crude oil prices plummeting 11% to $97 a barrel, the first dip below $100 since April. This decline was further fueled by expectations of a potential U.S.-Iran agreement, as reported by sources close to the White House. The prospect of a one-page memorandum to conclude the conflict buoyed hopes for more comprehensive nuclear discussions. However, the initial optimism waned when Iran dismissed the U.S. proposal as an “American wishlist.” Consequently, oil prices later rebounded slightly, settling at $101.83 a barrel.
The easing tension with Iran also had repercussions across other markets. European stock exchanges saw notable gains, with the UK’s FTSE 100 index advancing by 2%, France’s Cac 40 by 3%, and Germany’s Dax by 2.1%. On a broader scale, MSCI’s All-Country World Index reached new heights, climbing 1.6%. This rally was mirrored in emerging markets and Asia Pacific shares outside Japan, which rose 2.5%.
Despite the apparent progress, the specifics of Iran’s new procedures for the strait remain undisclosed. The Revolutionary Guards extended their appreciation to shipowners and captains for adhering to Iranian regulations while navigating the waterway. Meanwhile, global oil prices had previously reached a peak of $126 a barrel amid uncertainties surrounding the U.S. blockade’s duration and stalled peace negotiations.