Oil prices fell sharply on Tuesday after US Treasury Secretary Scott Bessent said Washington could strike a deal with Tehran within 24 hours to reopen the Strait of Hormuz to shipping.
The strait has been effectively blocked to Gulf oil and gas tankers for five months, and hopes of a breakthrough lifted markets worldwide. Bessent told CNBC he believed “there is a chance we may have a deal today or tomorrow to open the strait,” a key issue in ceasefire talks with Iran.
“I’d expect the energy prices to settle back down, which will be good for the entire world,” he added.
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The optimism pushed equities higher. Wall Street built on Monday’s record Dow close, with the S&P 500 on track for its own record on Tuesday. In Europe, Paris and Milan closed at all-time highs, while Frankfurt and Madrid extended Monday’s records.
The rally followed a volatile week driven by concerns over massive AI spending and the payoff timeline. Strong US corporate results helped calm nerves, including forecast-beating reports from AI data firm Palantir and equipment maker Caterpillar. Investors took that as a sign companies could withstand volatility from recent US and Israeli strikes on Iran.
Caution remains. An unknown projectile struck a cargo ship in the strait on Tuesday, and President Donald Trump separately said the waterway could reopen “within hours.” Previous announcements of a deal have failed to materialize.
Patrick Munnelly of Tickmill Group said markets were pricing “a more nuanced geopolitical path: lower risk of immediate military escalation, but no guarantee yet that the Strait of Hormuz returns to normal functioning.”
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Energy giants felt the shift. BP’s profit more than doubled in Q2 but shares dropped nearly 5% in London as the result was expected. Saudi Aramco posted a 44% jump in net profit. The five largest Western majors — BP, Chevron, ExxonMobil, Shell and TotalEnergies — reported a combined $47 billion for April to June.
Elsewhere, Lufthansa fell 8% on warnings that volatile jet fuel costs would hit full-year profit. Traders now await SpaceX earnings and key US jobs data for clues on interest rates.
