European Shares Rise Following US President's Positive Talks Update
Global stock markets experienced significant volatility and oil prices declined on Monday after the US postponed planned attacks on Iranian power plants by five days.
European stock markets, which had been sharply declining prior to the announcement, mostly recovered as investors responded to the news with relief.
The French CAC 40, Spanish IBEX, and German DAX, all of which opened lower, rose by 0.8%, 1%, and 1.2% respectively. The FTSE 100 initially fell by nearly 1.5% in early trading but reversed to gain 0.4% before closing down 0.2%. US markets were up more than 1% in early afternoon trading on Wall Street.
Oil prices, which had surged following President Trump's weekend threats to strike Iranian infrastructure unless Iran reopened the Strait of Hormuz, dropped sharply. Brent crude, the international benchmark, declined 10% to $101 a barrel. UK month-ahead gas prices fell 6% to 142p per therm.
Trump Announces Productive US-Iran Conversations and Strike Postponement
President Trump stated on his social media platform Truth Social that the US and Iran had engaged in "very good and productive conversations" over the past two days concerning "a complete and total resolution of our hostilities in the Middle East."
"Based on the tenor and tone of these in depth, detailed, and constructive conversations, which will continue throughout the week, I have instructed the Department of War to postpone any and all military strikes against Iranian power plants and energy infrastructure for a five-day period, subject to the success of the ongoing meetings and discussions."
The US dollar, often a safe haven during periods of market volatility, declined 0.4% against a basket of other major currencies.
Context of the Postponement and Regional Tensions
This reversal follows President Trump's announcement on Saturday that he was giving Iran 48 hours—until shortly before midnight GMT on Monday—to reopen the Strait of Hormuz, a critical waterway that carries approximately one-fifth of global oil and liquefied natural gas supplies.
Tehran responded by threatening to "irreversibly destroy" essential infrastructure across the Middle East, including vital water systems.
Iranian attacks have effectively closed the Strait of Hormuz, precipitating a global energy crisis. The head of the International Energy Agency, Fatih Birol, has described the situation as equivalent to a major supply disruption.
The global economy has prepared for significantly higher oil prices due to the disruption in the strait. Goldman Sachs has forecast Brent crude to average $85 a barrel this year, up from previous expectations of $77 a barrel. Brent crude reached $119.50 a barrel earlier this month, marking the highest price since the war began.
Shares in oil companies BP and Shell declined more than 3% on Monday following President Trump's announcement.
Impact on Energy Prices and Investor Sentiment
Elevated energy prices have unsettled investors, with gold prices also falling on Monday. The spot price of gold dropped 2.5% to $4,388 an ounce amid ongoing concerns about inflation and expectations of interest rate hikes. Gold tends to be less attractive when interest rates rise, as it does not yield income.
UK Government Response and Economic Measures
Keir Starmer was scheduled to hold an emergency COBRA meeting with senior ministers and Bank of England Governor Andrew Bailey on Monday to discuss the economic impact of the crisis in Iran. The agenda also included energy security, supply chain resilience, and the international response to the conflict, according to a Treasury statement.
The escalating conflict in Iran has increased pressure on Starmer to announce a support package to assist households with energy bills, which are expected to rise sharply when the current price cap on gas and electricity expires at the end of June.
Some pressure on the UK bond market eased as the 10-year government bond yield, a key indicator of borrowing costs, fell three basis points to 4.95% after reaching 5% last week—the highest level since the 2008 financial crisis.
