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Oil tumbled after Iran said it would reopen the Strait of Hormuz, as Donald Trump signalled Washington and Tehran were nearing a deal to end a war that has shaken global markets and economies.
The US president said the strategic chokepoint in the oil-rich Gulf was “ready for business and full passage”, thanking Iran after foreign minister Abbas Araghchi said the strait would be “completely open” to commercial shipping for the remainder of a fragile two-week ceasefire that expires on Tuesday night.
Brent crude, the international oil benchmark, dropped more than 11 per cent to about $88 a barrel, the lowest it has been for five weeks, while European gas prices fell 10 per cent.
Stocks and bonds rallied, with Wall Street’s S&P 500 rising 1.2 per cent, leaving it on course for its third-straight weekly gain. The index has jumped more than 9 per cent in April as traders bet on a de-escalation in a conflict that has caused big swings in markets and sent a fresh burst of inflationary pressure through the global economy.
While several oil and shipping executives told the FT the situation remained uncertain, with concerns about the strait potentially being mined or Iran still attempting to assert control, a handful of western vessels appeared to be preparing to exit the Gulf.
Ship tracking satellites showed at least 25 vessels, including three container ships belonging to the French shipping company CMA CGM, four Greek tankers and several Chinese vessels, heading for the strait through which a fifth of the world’s oil passed prior to the war.
The closure of the waterway for the past seven weeks has triggered a global energy crisis and provided Tehran with a significant source of leverage.
The declarations that the strait was reopening came a day after the US pressed Israel to pause its offensive against Hizbollah in Lebanon, which had been a condition of Iran’s to allow vessels to pass.
But Iran would still insist merchant vessels require permission from the Islamic Revolutionary Guard Corps before transiting the strait, an unnamed Iranian official told state television.
Trump said the US naval blockade he ordered this week to prevent ships entering or leaving Iranian ports would also remain in place until the warring parties reached a deal to end the war.
He has this week talked up the prospect of a broader agreement to end the conflict, suggesting a second round of talks between the adversaries could take place as early as this weekend.
On Friday he said this “process should go very quickly in that most of the points are already negotiated”.
Diplomats cautioned that no new talks were scheduled, adding disagreements over a deal on Iran’s nuclear programme continue to be the main barrier to a settlement.
Those include Trump’s demand that Tehran hand over its 440kg stockpile of enriched uranium, Iran’s insistence that it has a right to enrich, and whether the nation should be able to rebuild its main enrichment facilities — Natanz and Fordow — which the US bombed during Israel’s 12-day war against the country last June.
Trump has said Iran has agreed to hand over “nuclear dust”, a reference to the highly enriched uranium that is believed to be buried beneath the rubble of the bombed sites. But diplomats cautioned the matter was not settled.
Iran is also demanding sanctions relief and the US agreeing to unfreeze billions of dollars of its oil money held overseas.
Pakistan has been leading mediation efforts since high-level direct talks in Islamabad last weekend broke up without an agreement.
One non-Pakistani diplomat said Pakistan was pushing for an extension of the ceasefire in case an agreement was not sealed before it expires.
Pakistani government advisers said Islamabad was confident a deal could be struck before the truce ends.
Asim Munir, Pakistan’s military chief and most powerful figure, spent at least two days in Tehran this week holding talks with senior Iranian political leaders and military commanders.
The Pakistani advisers said securing the ceasefire for Lebanon and reopening the strait were priorities of Munir’s visit to Iran as he sought to lay the conditions for a broader agreement.
They added he remained in touch with Trump throughout.
Additional reporting by Alice Hancock
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