Oil Prices Crash as Iran Opens Strait of Hormuz, Boosting Global Markets
Global oil prices plummeted on Friday after Iran declared the Strait of Hormuz completely open, sending stock markets soaring as investors cheered the easing of supply chain disruptions. The strategic waterway, through which one-fifth of the world's crude oil normally flows, had been disrupted since the US-Israeli offensive began, but Iran's foreign minister Abbas Araghchi announced on X that passage for all commercial vessels was now open for the remainder of the ceasefire.
Market Rally and Economic Optimism
Kathleen Brooks, research director at XTB, described the development as the "biggest so far during the ceasefire," adding that it "gives hope that the war will end soon, and supply chains will return to some normality." She noted that while it will take time to relieve the backlog of tankers and repair damage from Iranian drones, this news "brightens the outlook for the global economy for the rest of this year."
In response, Brent oil traded at $89.15 a barrel on Friday afternoon, down sharply from $98.39 at Thursday's close in London. The oil price slump saw London's FTSE 100 underperform against European peers, with shares in BP and Shell falling heavily. However, the FTSE 100 still closed up 77.64 points, or 0.7%, at 10,667.63, while the FTSE 250 surged 426.42 points, or 1.9%, to 23,205.92, and the Aim All-Share rose 12.25 points, or 1.5%, to 810.11.
Global Market Gains and Political Developments
European equities also rallied, with the Cac 40 in Paris ending up 2.0% and the Dax 40 in Frankfurt rising 2.3%. In New York, the Dow Jones Industrial Average was up 1.9%, the S&P 500 gained 1.2%, and the Nasdaq Composite advanced 1.6%. Netflix missed out on the rally, with shares falling 9.7% due to soft second-quarter guidance.
Prime Minister Sir Keir Starmer announced that France and the UK will lead a multinational mission to ensure freedom of navigation in the Strait of Hormuz as "soon as conditions allow." He hailed Iran's announcement but cautioned that "we need to make sure that it is lasting and a workable proposal." Over a dozen countries have offered to contribute assets to the strictly peaceful and defensive mission.
Sector Performance and Economic Indicators
The reopening of the Strait dramatically improved the economic outlook for the UK, which is susceptible to energy price spikes and inflation threats. While energy stocks suffered—with BP down 7.4% and Shell down 5.6%—travel firms flourished. British Airways owner International Consolidated Airlines rose 6.2%, easyJet and Wizz Air gained 6.1% and 7.6% respectively, and Holiday Inn owner InterContinental Hotels Group advanced 5.3%.
Interest rate-sensitive housebuilders also benefited from the improved outlook, with Persimmon up 4.8% and Barratt Redrow up 4.0%. Chancellor Rachel Reeves indicated that changes to energy policy, including delinking gas and electricity prices and reforming North Sea drilling, would be announced soon.
Corporate Highlights and Future Outlook
Workspace Group shed 6.2% after warning of a "substantial step down" in trading profit as it invests to become the "first-choice provider of space." Gold traded at $4,869.13 an ounce, up from $4,802.13, pushing miner Fresnillo up 6.2%. The biggest risers on the FTSE 100 included Fresnillo, International Consolidated Airlines Group, and InterContinental Hotels, while the biggest fallers were BP, SSE, and Shell.
Looking ahead, Monday's global economic calendar includes an overnight interest rate decision in China, along with Canadian CPI and German PPI figures. The reopening of the Strait of Hormuz marks a significant step towards stabilising global energy markets and boosting economic confidence worldwide.
