Global stock markets experienced sharp swings on Monday after US President Donald Trump postponed planned military strikes on Iranian power plants for five days, citing productive talks. European shares, which had opened lower, mostly recovered, with the French Cac 40, Spanish Ibex and German Dax rising between 0.8% and 1.2%. The FTSE 100 initially fell nearly 1.5% before briefly turning positive, eventually closing down 0.2%. US markets were up more than 1% in early afternoon trading.
Oil prices dropped sharply following Trump's announcement. Brent crude fell 10% to $101 a barrel, while UK month-ahead gas prices declined 6% to 142p a therm. The US dollar slipped 0.4% against a basket of currencies as investors moved away from safe-haven assets. Shares in oil giants BP and Shell fell more than 3%.
Trump stated on his Truth Social platform that the US and Iran had held 'very good and productive conversations' over the past two days regarding a resolution of hostilities in the Middle East. He instructed the Department of War to postpone strikes for five days, subject to the success of ongoing meetings. This followed his weekend threat to give Iran 48 hours to open the Strait of Hormuz, which carries about a fifth of global oil and LNG supplies.
Iran had warned it would 'irreversibly destroy' essential infrastructure across the region if the US followed through. The crisis has already disrupted the strait, prompting the International Energy Agency to compare the impact to the 1970s oil shock combined with the fallout from Russia's invasion of Ukraine. Goldman Sachs revised its Brent crude forecast up to $85 a barrel for this year.
Gold prices also fell 2.5% to $4,388 an ounce amid expectations of higher inflation and interest rate rises. In the UK, Prime Minister Keir Starmer was due to hold an emergency Cobra meeting with ministers and Bank of England Governor Andrew Bailey to discuss the economic impact and potential support for energy bills, which are expected to rise by 20% at the end of June.
