Global markets reacted swiftly after U.S. President Donald Trump indicated progress in diplomatic efforts with Iran, raising hopes of easing tensions in the Middle East and preventing further escalation of conflict. Oil prices dropped sharply while stock markets rebounded, reversing earlier losses driven by fears of a prolonged war.
Brent crude prices initially plunged by as much as 13 per cent following Trump’s announcement that discussions with Iran had been “very good and productive.” He also confirmed a temporary five-day pause on any planned military strikes targeting Iranian energy infrastructure. The move signalled a potential shift away from immediate confrontation, calming investors who had been unsettled by recent threats of escalation.
Just days earlier, Trump had warned of severe retaliation against Iran’s power facilities if the Strait of Hormuz — a critical global shipping route — was not reopened. Iran had responded with threats of its own, targeting infrastructure across the region. The exchange heightened concerns of a broader conflict, especially after Iran effectively restricted access through the strait, which carries roughly one-fifth of the world’s oil and liquefied natural gas supplies.
The disruption had already sent oil prices soaring, with Brent crude climbing from around $72 per barrel before the conflict to a peak of $113. However, following the latest diplomatic signals, prices fell sharply to below $100 before stabilizing slightly above $104.
Stock markets mirrored this shift in sentiment. European markets recovered from earlier declines, with Germany’s DAX and France’s CAC both posting gains after opening significantly lower. London’s FTSE 100 also rebounded, briefly moving into positive territory before settling slightly down for the day. In contrast, Asian markets had already closed before the news broke, recording steep losses, particularly in Japan and South Korea, where economies are heavily reliant on energy imports passing through the Strait of Hormuz.
The ongoing conflict has disrupted global energy supplies, raising fears of fuel shortages and higher energy costs worldwide. Concerns have also been mounting over the broader economic impact, including rising household energy bills and inflationary pressures.
Earlier in the day, the head of the International Energy Agency warned that the situation could evolve into one of the most severe energy crises in decades, drawing comparisons to the oil shocks of the 1970s and the global disruptions caused by Russia’s invasion of Ukraine in 2022. The combination of supply constraints and geopolitical instability has created a volatile environment for both energy markets and the global economy.
In response to the growing uncertainty, governments are closely monitoring the situation. In the United Kingdom, Prime Minister Keir Starmer is convening an emergency meeting focused on energy security and supply chain resilience, with senior officials and financial leaders expected to assess the potential economic fallout.
Although Trump’s announcement has temporarily eased market anxiety, analysts caution that the situation remains fragile. The next steps in diplomatic negotiations and developments in the region will likely determine whether markets stabilize further or face renewed volatility in the days ahead.