Oil prices plunged and global stock markets rebounded after US President Donald Trump announced a temporary halt to planned military strikes against Iranian energy infrastructure, easing investor concerns over a widening conflict in the Middle East.

The announcement, made via social media, followed days of escalating rhetoric and heightened fears that tensions between the United States, Israel, and Iran could spiral into a prolonged regional war. Trump said the decision was based on “constructive” discussions aimed at achieving a “complete and total” resolution of hostilities.

However, Iranian officials quickly denied that any such talks had taken place, casting doubt on the US president’s claims and injecting fresh uncertainty into an already volatile geopolitical situation.

Financial markets reacted swiftly to Trump’s statement. The price of Brent crude, which had surged to as high as $113 per barrel earlier in the day, fell sharply to around $96 before stabilising slightly above that level.

The decline in oil prices signalled a temporary easing of supply concerns, particularly regarding the Strait of Hormuz, a critical global shipping route through which roughly 20% of the world’s oil and liquefied natural gas passes.

At the same time, stock markets across Europe and the United States posted significant gains. London’s FTSE 100 index recovered from earlier losses to close flat, while Germany’s DAX index rose 1.2% and France’s CAC 40 gained nearly 0.9%.

In the United States, the S&P 500 climbed more than 1.1%, while the Dow Jones Industrial Average ended the day nearly 1.4% higher, reflecting renewed investor confidence.

Asian markets, which had closed before Trump’s announcement, painted a starkly different picture. Japan’s Nikkei index fell 3.5%, and South Korea’s Kospi dropped 6.5%, highlighting the earlier wave of panic triggered by fears of supply disruptions.

Both Japan and South Korea are heavily reliant on energy imports that pass through the Strait of Hormuz, making them particularly vulnerable to any disruption in the region.

The conflict, which began on February 28, has already led to significant disruptions in global energy flows. Iran has effectively blocked the Strait of Hormuz, sending shockwaves through international markets and pushing fuel prices higher.

Trump had previously warned that the United States would “obliterate” Iranian power plants if the waterway was not reopened within 48 hours. Iran responded with threats to target key infrastructure across the region, further escalating tensions.

In his latest statement, Trump said he had instructed the US military to postpone any strikes for five days, pending the outcome of ongoing discussions. He described the alleged talks as “in-depth, detailed and constructive,” suggesting a possible diplomatic breakthrough.

Yet Iran’s foreign ministry rejected these claims outright, stating that no negotiations had occurred. Iranian officials accused the US of spreading “fake news” to manipulate financial markets and deflect attention from its strategic challenges.

This contradiction has left investors cautious, despite the immediate market relief. Analysts warn that the situation remains highly unpredictable, with the potential for rapid shifts in sentiment.

Susannah Streeter, chief investment strategist at Wealth Club, described the market reaction as a “wild ride,” noting that investors have repeatedly been caught off guard by sudden changes in rhetoric.

She cautioned that relying on Trump’s statements carries significant risks, given the pattern of rising and falling expectations over the past several weeks.

Despite the drop in oil prices, they remain elevated compared to pre-conflict levels, indicating ongoing concerns about supply disruptions. Analysts say that even if a ceasefire is reached, restoring normal flows could take time due to damage to infrastructure and logistical challenges.

The International Energy Agency (IEA) has warned that the current situation could develop into one of the most severe energy crises in decades. Its executive director, Fatih Birol, compared the unfolding crisis to the oil shocks of the 1970s and the disruptions caused by Russia’s invasion of Ukraine in 2022.

He described the current scenario as a combination of multiple crises, with both oil and gas markets under strain. The surge in prices has already raised concerns about rising energy bills and inflation in many countries.

In the United Kingdom, Prime Minister Keir Starmer has been closely monitoring the situation. He held discussions with Trump over the weekend, focusing on the urgent need to reopen the Strait of Hormuz and stabilise energy supplies.

Starmer is also set to chair an emergency Cobra committee meeting to assess the impact of the conflict on national energy security and the broader economy.

The meeting will include senior officials and the governor of the Bank of England, with discussions expected to centre on supply chain resilience and the rising cost of living.

The financial strain is already evident, with UK government borrowing costs climbing sharply in recent days. Yields on 10-year government bonds reached their highest levels since the 2008 financial crisis before easing slightly following Trump’s announcement.

The broader economic implications of the conflict are becoming increasingly clear. Higher energy prices are expected to weigh on businesses and consumers alike, potentially slowing economic growth.

For now, markets appear to be taking cautious optimism from the temporary pause in hostilities. However, the conflicting narratives from Washington and Tehran underscore the fragility of the situation.

Investors and policymakers alike are bracing for further volatility, as the path toward a lasting resolution remains uncertain.