Oil prices dropped sharply and stock markets recovered after U.S. President Donald Trump said Washington and Tehran had held “very good and productive” discussions aimed at ending the conflict in the Middle East.
Following the remarks, Brent crude prices initially plunged by about 13%, while the FTSE 100 index rebounded after earlier falling by more than 2%.
Trump said on social media that he would “POSTPONE ANY AND ALL MILITARY STRIKES AGAINST IRANIAN POWER PLANTS AND ENERGY INFRASTRUCTURE” for five days.
Just days earlier, on Saturday, the president had warned he would “obliterate” Iran’s power plants if the Strait of Hormuz — a key global shipping route — was not reopened. Iran had responded by threatening to target vital infrastructure across the region.
Those statements over the weekend had unsettled financial markets and intensified concerns that the U.S.-Israeli war with Iran could turn into a prolonged conflict.
Since the war began on February 28, Iran has effectively blocked the Strait of Hormuz, one of the world’s busiest routes for oil shipments.
Roughly 20% of global oil and liquefied natural gas flows normally pass through the waterway, and the conflict has pushed fuel prices sharply higher worldwide.
Earlier on Monday, International Energy Agency (IEA) Executive Director Fatih Birol warned the war could lead to the most severe energy crisis the world has seen in decades.
Birol compared the current turmoil with the energy shocks of the 1970s as well as the disruption triggered by Russia’s 2022 invasion of Ukraine.
“This crisis as things stand is now two oil crises and one gas crash put all together,” he said while speaking at an event in Australia.
At one point on Monday, Brent crude had climbed as high as $113 per barrel before falling sharply following Trump’s latest comments.
Prices dropped to a low of $97.47 per barrel before partially recovering to around $104. Before the conflict began, Brent had been trading at roughly $72 per barrel.
As oil retreated, equity markets moved higher. London’s FTSE 100 initially rose to show a gain of about 0.5%, though it later pulled back to trade around 0.3% lower on the day.
Germany’s DAX index climbed 1.5%, while France’s CAC 40 gained 1%. Earlier in the session, both indices had been down close to 2%.
Asian markets, which had already closed before Trump’s latest comments, experienced sharp declines.
Japan’s Nikkei index ended the day down 3.5%, while South Korea’s Kospi index fell 6.5%. Both economies have been particularly sensitive to the conflict because they rely heavily on oil and gas shipments that typically pass through the Strait of Hormuz.
The war has already disrupted global energy supplies, driving prices higher and creating fuel shortages in some areas.
The surge in oil and gas prices since the conflict began has also raised concerns that household energy bills in the UK could rise significantly later this year.
UK Prime Minister Sir Keir Starmer spoke with Trump on Sunday, and the two leaders discussed the need to reopen the Strait of Hormuz.
Later on Monday, Starmer is expected to chair a meeting of the government’s emergency Cobra committee, which will also be attended by Bank of England Governor Andrew Bailey.
The meeting — scheduled before Trump’s latest announcement — is expected to focus on energy security, supply chain resilience and the potential impact of the war on living costs.
UK government borrowing costs have climbed sharply in recent days, reaching their highest levels since the 2008 financial crisis on Friday.
On Monday, the yield on 10-year UK government bonds rose as high as 5.12% before easing back to about 4.88% after Trump’s comments.
Leave a Reply