European markets rallied sharply on Wednesday after U.S. President Donald Trump announced measures to safeguard global oil shipments through the Strait of Hormuz, easing investor concerns over escalating tensions in the Middle East.
The pan-European Stoxx 600 jumped 1.6%, marking its strongest session since May, while the Euro Stoxx 50 rose by the same margin. Technology, utilities, and consumer stocks led the recovery, with notable gains from ASML (+1.5%) and SAP (+1.6%). U.S. stock futures also pointed higher following two days of sharp declines.
Trump’s Hormuz Gambit
Investor sentiment improved after President Trump said the U.S. would provide “political risk insurance and guarantees” for maritime trade—particularly in energy—passing through the Gulf of Oman and the Strait of Hormuz. He indicated that U.S. naval escorts could be deployed “if necessary” to ensure security for global shipping routes.
The Strait of Hormuz, a narrow chokepoint between Iran and Oman, handles roughly 20% of the world’s oil and liquefied natural gas exports. Shipments through the area had largely halted following U.S. and Israeli strikes that killed Iranian Supreme Leader Ayatollah Ali Khamenei over the weekend, prompting retaliatory attacks on oil refineries and U.S. embassies across the region.
Oil prices, which surged by more than 13% during the conflict’s early days, began to stabilize. Brent crude traded near $83 per barrel on Wednesday, retreating from the prior day’s high above $85. On Wall Street, the S&P 500 trimmed heavy intraday losses to close 0.9% lower, while the Dow Jones Industrial Average fell by 0.8%.
Diplomatic Signals Offer Hope
Reports of behind-the-scenes diplomatic outreach also buoyed markets. The New York Times revealed that Iran had initiated indirect talks with the U.S. to discuss a possible ceasefire, while U.S. Defense Secretary Pete Hegseth told reporters he expected to gain “full control of Iranian airspace in under a week.”
In a note to clients, Goldman Sachs raised its second-quarter Brent crude forecast by $10 to $76 per barrel, cautioning that prices could still hit $100 if disruptions in the Hormuz corridor persist beyond five weeks.
Spain’s IBEX 35 diverged from the broader European rally after Trump threatened to suspend trade with Madrid for refusing to allow U.S. forces to operate from Spanish bases. Meanwhile, inflation concerns lingered as the U.S. 10-year Treasury yield climbed for a third day and gold continued its advance, signaling ongoing demand for safe-haven assets.
