Investing.com – European markets experienced a significant surge on Friday, while global oil prices saw a sharp decline. This market reaction followed an announcement by Iran’s foreign minister that the strategically vital Strait of Hormuz had been temporarily reopened for commercial shipping.
The news brought immediate relief to investors, with the pan-European Stoxx 600 index climbing 1.5%. Germany’s Dax index jumped 2.3%, France’s CAC 40 spiked 2%, and the UK’s FTSE 100 recorded a more modest gain of 0.7%.
Strait of Hormuz Reopens Amid Ceasefire
In a statement posted on X (formerly Twitter), Iran’s foreign minister, Abbas Araghchi, declared: “In line with the ceasefire in Lebanon, the passage for all commercial vessels through Strait of Hormuz is declared completely open for the remaining period of ceasefire.” This critical waterway, essential for global oil shipments, had been a focal point of recent geopolitical tensions.
U.S. President Donald Trump also acknowledged the development on social media, stating: “IRAN HAS JUST ANNOUNCED THAT THE STRAIT OF IRAN IS FULLY OPEN AND READY FOR FULL PASSAGE. THANK YOU!”
Market Repercussions: Winners and Losers
The announcement sent immediate ripples across various market sectors. Travel and leisure stocks in Europe, which had been under considerable pressure due to soaring fuel costs exacerbated by the Strait’s closure, saw a significant rebound. Luxury brands, including industry giants like Burberry, LVMH, and Kering, also advanced, signaling a sigh of relief for a sector that had previously warned about the conflict’s impact on sales.
Conversely, energy stocks, typically beneficiaries of higher oil prices, experienced a sharp downturn. Trading in Italy’s Eni was even temporarily halted after a substantial 4.06% slide. Brent crude, the international benchmark, plummeted by 10.5% to $88.96 a barrel, and European natural gas prices also fell.
Further boosting equity markets was an easing of European government bond yields. These yields had recently risen in response to inflationary pressures stemming from the energy shock, and their decline typically indicates improved market sentiment and lower borrowing costs.
In currency markets, the euro strengthened against the dollar, reaching $1.1834. This move effectively erased gains the dollar had made as a safe-haven currency during the period of heightened conflict.
Progress in Iran Peace Talks
These market movements coincide with significant diplomatic progress. President Trump had announced a 10-day ceasefire between Israel and Lebanon on Thursday. The ongoing Israeli operations against Hezbollah targets in Lebanon had been a key obstacle in broader negotiations between Iran and the U.S.
Trump also hinted at a potential resumption of negotiations between Washington and Tehran as early as this weekend, suggesting the two nations are “very close” to a deal. He indicated that Iran has agreed to refrain from possessing a nuclear weapon for over 20 years, a central U.S. concern that Trump cited as a reason for the conflict, which began with joint U.S. and Israeli strikes on Iran in late February.
In return for these concessions, Iran has consistently called for the lifting of international sanctions.
Reports from Axios, citing officials familiar with the matter, suggest Washington and Tehran are discussing a three-page plan to resolve the conflict. This proposal reportedly includes the U.S. unfreezing $20 billion in Iranian funds in exchange for Iran agreeing to relinquish its enriched uranium. Trump also stated he would consider extending the temporary ceasefire, set to expire later this month, if an agreement with Tehran was imminent.
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