Oil slides, stocks rise as Trump hints at de-escalation with Iran

Global oil prices fell sharply on Monday while equity markets in Europe and the United States rebounded, as investors reacted to signals from US President Donald Trump suggesting a potential de-escalation in tensions with Iran.

Crude prices dropped steeply in early trading, at one point falling by more than 14 per cent, after Mr Trump indicated he had ordered a halt to strikes on Iranian energy infrastructure following what he described as constructive discussions with Tehran. The decline later moderated, with benchmark prices still significantly lower on the day after Iranian authorities rejected claims that negotiations had taken place.

The abrupt shift in tone from Washington introduced fresh volatility into already unsettled markets. Analysts said the contrasting messages—ranging from threats of escalation over the weekend to indications of diplomacy—have made it difficult for investors to assess the trajectory of the crisis.

European gas prices also moved lower, reflecting a temporary easing of supply concerns. However, market participants cautioned that uncertainty remains high, with developments continuing to evolve rapidly.

Equity markets, which had opened the week under pressure, reversed course following the latest remarks. Major European indices moved into positive territory, while Wall Street saw broad gains in early trading, supported by expectations that a wider conflict may yet be avoided.

The recovery in equities lost some momentum after reports from Iranian media denied that talks with the United States had occurred, underscoring the fragile nature of the rebound.

Market strategists noted that investors appear to be searching for signs of a potential diplomatic exit from the crisis, even as geopolitical risks remain elevated. The prospect of reduced escalation has, for now, provided some relief to financial markets.

The developments follow a period of heightened tension in the Middle East, with the Strait of Hormuz—a critical route for global oil and liquefied natural gas shipments—remaining under threat. The waterway handles a substantial share of global energy flows, and any disruption has immediate implications for supply and pricing.

In recent days, warnings over potential blockades and retaliatory action have fuelled fears of a prolonged energy shock. The International Energy Agency has cautioned that the situation could trigger one of the most severe disruptions to global energy markets in decades if escalation continues.

Despite Monday’s decline, oil prices remain elevated compared with levels prior to the latest conflict, raising concerns about inflationary pressures worldwide. Higher energy costs could feed into broader price increases, complicating monetary policy decisions for central banks and potentially placing additional strain on households.

Movements in currency and bond markets reflected shifting investor sentiment. The US dollar weakened against major currencies, while government bond yields eased slightly after recent gains driven by inflation concerns. Gold prices, which had come under pressure from rising yields, recovered some ground as uncertainty persisted.

The broader geopolitical backdrop remains tense, with Israeli officials indicating that military operations in the region could continue for several weeks. As a result, analysts warn that market volatility is likely to persist, with energy prices and global financial markets closely tied to further developments in the conflict.