Global financial markets shifted sharply after Donald Trump said the US would postpone potential strikes on Iranian energy infrastructure, citing what he described as constructive discussions about ending the conflict. Oil prices dropped while stock markets in Europe and the US rebounded following the announcement, although Iran denied that any negotiations had taken place.
The response highlighted how sensitive markets remain to developments in the ongoing conflict involving the US, Israel, and Iran.
Oil Prices Drop After Recent Surge
The price of Brent crude fell sharply after Trump’s comments.
Earlier on Monday, Brent had reached $113 per barrel amid concerns about prolonged disruption to global supply.
Following the statement, prices dropped to a low of $96 per barrel before recovering slightly.
The decline came after days of volatility linked to fears that the conflict could escalate further and disrupt energy infrastructure across the region.
Trump had previously warned that the US would “obliterate” Iranian power plants if the Strait of Hormuz was not reopened within 48 hours.
Iran had said it would respond by targeting key infrastructure.
Since the conflict began on 28 February, the strait has effectively been blocked. Around 20% of the world’s oil and liquefied natural gas normally passes through the route.
Stock Markets Recover Across Regions
Equity markets responded positively to the delay in military action.
In the UK, the FTSE 100 ended the day flat after earlier falling more than 2%.
Germany’s DAX closed 1.2% higher, while France’s CAC 40 rose about 0.9%.
In the United States, the S&P 500 gained more than 1.1%, and the Dow Jones Industrial Average rose nearly 1.4%.
Asian markets, which closed before Trump’s announcement, recorded declines earlier in the day.
Japan’s Nikkei 225 dropped 3.5%, while South Korea’s KOSPI fell 6.5%.
Japan and South Korea are particularly exposed to energy supply disruptions due to their reliance on oil and gas shipments through the Strait of Hormuz.
Conflicting Statements On Negotiations
In a post on Truth Social, Trump said the US and Iran had held discussions over the weekend aimed at a “complete and total resolution” of hostilities.
He said he had instructed the military to delay strikes for five days based on the tone of those conversations, with the decision dependent on ongoing talks.
Iran’s foreign ministry rejected that claim.
A statement said no negotiations had taken place, and Iranian officials accused the US of spreading misinformation.
Mohammad-Bagher Ghalibaf, speaker of Iran’s parliament, said on social media that such claims were intended to influence financial and oil markets.
Energy Market Risks Remain
Despite the drop in oil prices, analysts said markets remain under pressure.
Susannah Streeter, chief investment strategist at Wealth Club, said the situation had created significant volatility and warned that reliance on political statements carried risks.
She noted that oil prices remaining above $100 per barrel would continue to strain businesses and consumers.
She also said traders still expect reduced energy flows from the Middle East even if a ceasefire is reached, due to ongoing disruption to supply routes and infrastructure.
Warnings Of A Broader Energy Crisis
The conflict has already disrupted global energy supplies and contributed to rising fuel costs.
International Energy Agency head Fatih Birol warned earlier on Monday that the situation could develop into one of the most severe energy crises in decades.
Speaking at an event in Australia, Birol compared the current situation to the oil crises of the 1970s and the impact of Russia’s 2022 invasion of Ukraine.
He said the situation represented “two oil crises and one gas crash” occurring simultaneously.
Government Response And Economic Impact
In the UK, Keir Starmer held discussions with Trump on Sunday regarding the need to reopen the Strait of Hormuz.
Starmer is expected to chair a meeting of the government’s Cobra emergency committee, with Andrew Bailey in attendance.
The meeting is set to address energy security, supply chain resilience, and the potential impact on the cost of living.
Rising borrowing costs have added to economic pressure.
UK government bond yields for 10-year borrowing reached 5.12% earlier on Monday, the highest level since the 2008 financial crisis, before falling to around 4.9% after Trump’s comments.
Featured image credits: PICRYL
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