Oil prices have fallen below $100 and stock markets rose as Donald Trump touted “great progress” towards a “final agreement” with Iran, and Tehran indicated it was ready to reopen the strait of Hormuz.
The US president said he would briefly pause his “Project Freedom” operation escorting ships through the strait, which carries about a fifth of the world’s oil supplies but has been blockaded by Iran since late February, triggering a global energy crisis.
Trump said he was stopping the efforts for “a short period” so he could finalise a deal with Tehran but added that his blockade of Iranian ports would remain in place.
Safe transit through the strait will be ensured with US threats coming to an end and new procedures in place, the Revolutionary Guards’ Navy said on Wednesday, according to state media. It was Iran’s first reaction to the US pausing operations to help stranded ships pass through the strait.
The news sent Brent crude oil – which had risen as much as 6% earlier this week after the latest attacks in the Middle East – tumbling 10% to $99 a barrel. It is the first time it has fallen below $100 since 22 April.
The crude price had been falling on Wednesday morning, and accelerated after a report by the Axios news site that the White House believed it was getting close to agreeing a one-page memorandum of understanding to end the war with Iran. It said the two sides were ready to set a framework for more detailed nuclear talks, citing four sources including two US officials.
The Guards’ statement on the strait did not specify what the new procedures entailed and thanked shipowners and captains for respecting Iranian regulations when moving through the waterway.
The oil price had hit $126 a barrel last week, its highest level since 2022, after Trump said the US blockade of Iranian ports could last for months and peace talks remained stalled.
European stock markets rallied on Wednesday. The UK’s FTSE 100 index rose 2% in early trading, and France’s Cac 40 and Germany’s Dax were up about 2.7%.
MSCI’s All-Country World Index rose 0.4% to a new record alongside similar milestones for its emerging markets benchmark and its broadest index of Asia Pacific shares outside Japan, which rose by 2.8%.
The rally was led by a 6.6% surge in South Korea’s Kospi, which cleared the 7,000 mark for the first time. As the Seoul market reopened after a holiday, Samsung Electronics increased by 14.8%, topping a $1tn market value, as it rode the boom in AI stocks.
Markets on Wall Street had hit new records on Tuesday as the S&P 500 rose 0.8% and the Nasdaq Composite gained 1%.
On the bond market, UK long-term gilt yields decreased slightly after reaching their highest level since 1998 on Tuesday. The yield on 30-year gilts – which is the effective interest rate on the UK government’s long-term borrowing – reduced by about 5 basis points to 5.68%.
Gold, which is traditionally seen as a safe haven asset, rose by almost 2.5% to $4,667 an ounce.
Trump’s latest comments came as the French shipping group CMA CGM said one of its ships, the San Antonio, had been the target of an attack while crossing the strait of Hormuz.
The attack, which occurred on Tuesday, injured crew members and damaged the vessel, the company said, adding it was “closely monitoring the situation and remains fully mobilised alongside the crew”.
The chief investment strategist at Wealth Club, Susannah Streeter, said: “A dam of tension has eased with relief flooding into financial markets, amid hopes that hostilities will cease in the Middle East, with the Trump administration making conciliatory moves.
“Relief is starting to seep into the bond markets, with UK gilt yields easing off amid hopes that inflation might not head quite as high if a longer-term resolution can be negotiated.”
The chief investment officer at the wealth management arm of UBS, Mark Haefele, said in a note to clients that Trump’s comments marked an “abrupt shift” from recent days, but with the strait still effectively closed, government bond yields still remained well above their normal levels.
“Futures pricing now expects about three 25-basis point rate hikes by the European Central Bank and the Bank of England over the next 12 months,” he said. “Markets also see no interest rate cuts from the Federal Reserve this year and a 70% probability of a rate hike in 2027.”
The Bank of England kept rates on hold at 3.75% last week, but said the UK may need to brace for increases later this year.
Reuters contributed to this report
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