Financial markets around the world found their footing Monday after President Donald Trump disclosed that ongoing talks with Iran had been sufficiently productive to justify a five-day delay in planned American strikes against Iranian energy infrastructure. The announcement, made through the president’s Truth Social platform, described the diplomatic conversations as detailed and constructive. Investors who had been positioning for military escalation rapidly unwound those trades, producing sharp moves across equity, currency, and commodity markets.
The crisis between the United States and Iran centers on the Strait of Hormuz, a narrow waterway through which approximately 20% of global oil and liquefied natural gas shipments pass. Iranian actions have effectively closed this vital chokepoint, triggering what the International Energy Agency describes as an energy shock comparable to the twin crises of the 1970s combined with the disruption from Russia’s war in Ukraine. Oil prices had climbed to $119.50 per barrel earlier this month as markets anticipated prolonged supply disruptions. Trump’s Saturday ultimatum giving Iran 48 hours to reopen the strait had heightened fears of imminent conflict.
European equity indices staged a dramatic turnaround from their early losses. The German Dax finished 1.2% higher, with the Spanish Ibex gaining 1% and the French Cac 40 up 0.8%. London’s FTSE 100 experienced particular volatility, plunging nearly 1.5% at the open before recovering to post a brief gain, though it ultimately closed down 0.2%. American markets were firmly positive by early afternoon, trading more than 1% higher. The dollar index fell 0.4% as reduced uncertainty diminished demand for the traditional safe-haven currency.
Energy prices retreated sharply across the board. Brent crude oil dropped 10% to $101 per barrel, giving back much of the geopolitical premium accumulated during weeks of escalating tensions. UK natural gas futures declined 6% to 142 pence per therm. Oil company shares fell despite the broader market rally, with BP and Shell both losing more than 3%. Gold also weakened, sliding 2.5% to $4,388 per ounce as improved risk appetite and moderating inflation expectations reduced investor interest in the non-yielding metal.
The five-day window creates an opportunity for substantive negotiations, though the path to resolution remains uncertain. Iran has issued explicit warnings that American attacks would provoke devastating retaliation against critical regional infrastructure, including water systems across the Middle East. British Prime Minister Keir Starmer convened emergency Cobra discussions with senior ministers and Bank of England Governor Andrew Bailey to coordinate economic contingency planning and assess energy security vulnerabilities. UK borrowing costs showed marginal improvement, with the 10-year gilt yield declining to 4.95% from the 5% level touched last week. Pressure continues to mount on the British government to provide household support before energy price caps expire at the end of June, when bills are expected to rise approximately 20%.