Oil prices remained volatile on Thursday as markets grappled with contradictory signals from Washington and Tehran regarding the prospect of de-escalation in the ongoing conflict. The uncertainty overshadowed earlier optimism, leaving investors in a holding pattern and pushing the international benchmark Brent crude back above $106 a barrel.
The renewed caution in global markets followed a sharp reversal from Wednesday’s bullish sentiment, when major European indices had rallied between 1.3% and 1.6%. By Thursday, that optimism had evaporated. Leading European bourses opened with losses ranging from 0.4% to 0.8%, mirroring a broader sell-off in Asian markets. The shift came as diplomatic efforts to broker a ceasefire appeared to stall, with Iran and the US issuing conflicting assessments of progress.
“Investors have eagerly awaited a ceasefire in the Middle East this week, but once again there are mixed messages from the US and Iran, leaving markets confused,” said Dan Coatsworth, head of markets at AJ Bell. “Momentum has been lost across the main European stock indices, and oil has edged higher, meaning it’s still a waiting game.”
The conflicting signals were underscored by US President Donald Trump, who claimed a deal to end the war was imminent. His assertion was undercut by Tehran’s rejection of a 15-point US ceasefire proposal, as well as the continued deployment of thousands of additional US troops to the region. Iran, for its part, has put forward its own counterproposals even as its military forces remain engaged in strikes against Israel.
Losses on European exchanges deepened through the morning session. The FTSE 100 in London fell 0.8%, the CAC 40 in Paris dropped nearly 0.7%, and the DAX in Frankfurt traded 1.2% lower within an hour of the open.
The upward pressure on oil prices was exacerbated by escalating tensions in the Strait of Hormuz, a critical chokepoint for global crude exports. Iranian forces have effectively blocked the waterway in recent days, and Tehran now appears to be moving toward formalizing its control.
According to reports from the Fars and Tasnim news agencies, both affiliated with Iran’s Revolutionary Guard, lawmakers are advancing legislation to codify Iranian sovereignty over the strait. The bill would also authorize the collection of transit fees from vessels—a move that would fundamentally alter the legal status of a waterway long considered international and open to all shipping.
“Parliament is pursuing a plan to formally codify Iran’s sovereignty, control and oversight over the Strait of Hormuz, while also creating a source of revenue through the collection of fees,” said lawmaker Mohammadreza Rezaei Kouchi, as quoted by the agencies.
Such a measure would likely provoke a strong response from Gulf Arab states, the United States, and other maritime powers that rely on the strait for energy shipments. It also adds a new layer of complexity to an already volatile geopolitical landscape.
By 10 a.m. CET, Brent crude was trading 4% higher at over $106 a barrel, while West Texas Intermediate (WTI) rose by a similar margin to around $94 a barrel. The price surge comes amid reports that the US administration is modeling the potential economic impact of oil reaching $200 a barrel, according to sources cited by Bloomberg—an indication of the severity of supply disruption scenarios now being considered.
The risk-off sentiment extended across asset classes. Asian equity markets closed sharply lower, with Tokyo’s Nikkei 225 down 0.8%, South Korea’s Kospi plunging 3.3%, and Hong Kong’s Hang Seng falling 1.9%.
Gold, which had posted significant losses earlier in the week, continued its downward trend. The price per ounce fell more than 2.7% to around $4,430 in European morning trading, as a stronger US dollar weighed on the precious metal.
Cryptocurrencies also faced broad selling pressure, with prices sliding between 1.3% and 4%. The CoinDesk Bitcoin Price Index dropped 1.3% to $69,896.
In currency markets, the US dollar strengthened against both the euro and the British pound. The euro traded at $1.1558, while the pound fell to $1.3351. The yen held steady against the dollar at around ¥159.46, reflecting a degree of stability amid broader market unease.
With diplomatic channels showing little sign of near-term progress and Iran moving to assert unilateral control over a vital global shipping lane, markets remain on edge. The conflicting narratives from Washington and Tehran suggest that any resolution is unlikely to be imminent, leaving oil prices and broader risk assets vulnerable to further volatility in the days ahead.
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