Key Takeaways
- Crude oil prices surged over 4% after President Trump declared the Memorandum of Understanding (MOU) with Iran "over," effectively ending a fragile ceasefire.
- The U.S. has ordered a complete halt to trade with Spain, with Trump labeling the NATO ally a "terrible partner" following Madrid's refusal to allow U.S. military base access for operations against Iran.
- Spain’s IBEX 35 (ES35) dropped 1.8%, significantly underperforming the broader STOXX 600, as markets reacted to the sudden severance of transatlantic trade ties.
- Iran launched retaliatory strikes against U.S. military sites in Bahrain and Kuwait after the U.S. Treasury revoked oil export waivers and conducted "powerful" strikes on over 80 Iranian targets.
- NATO Secretary General Mark Rutte confirmed a "step-by-step" implementation of a Greenland deal with the U.S., while European allies pledged increased defense spending to appease the Trump administration.
Middle East Ceasefire Collapses
Global energy markets were thrown into turmoil Wednesday as President Donald Trump announced that the U.S. is withdrawing from the Memorandum of Understanding (MOU) with Iran. Speaking at the NATO summit in Ankara, Trump described the agreement as "likely finished" and referred to Iranian leadership as "scum" and "dirty players." The president stated he no longer wishes to engage with Tehran, though he noted that lower-level negotiators might continue talks despite him viewing them as a "waste of time."
The collapse of the deal follows a violent escalation in the Strait of Hormuz, where the U.S. military launched strikes against more than 80 targets last night. These actions were in response to Iranian attacks on three commercial vessels, including a Qatari LNG tanker. In retaliation, the Islamic Revolutionary Guard Corps (IRGC) targeted U.S. military installations in Bahrain and Kuwait, including the headquarters of the U.S. Navy's Fifth Fleet.
Market Reaction: Oil Spikes, Spanish Stocks Tumble
Oil benchmarks reacted sharply to the news, with Brent Crude (BZ=F) and WTI Crude (CL=F) both rising more than 4% in early trading. The price of Brent surged toward $74 a barrel, erasing recent declines that had been driven by hopes of a lasting peace. Analysts warn that the return to a "de facto closure" of the Strait of Hormuz could push prices toward the $100 mark if the conflict escalates further.
In equity markets, Spain's IBEX 35 (ES35) fell 1.8% following Trump's directive to Treasury Secretary Scott Bessent to halt all trade with the country. The president criticized Spain as a "poor NATO ally," citing its refusal to allow U.S. forces to use joint military bases for strikes against Iran. This trade freeze follows months of tension between Washington and the left-wing government in Madrid over defense spending and military cooperation.
NATO Tensions and the Greenland Deal
Despite the friction with Spain, NATO Secretary General Mark Rutte attempted to project a sense of alliance unity by announcing that European members are significantly increasing defense spending. Rutte also confirmed that a deal regarding Greenland is being implemented "step-by-step," including an increased U.S. military presence on the island. Trump reiterated his belief that the U.S. should have retained control of Greenland after World War II, dismissing its significance to Denmark.
The president also turned his attention to China, praising President Xi Jinping for being "fair" while simultaneously rejecting Chinese influence over the Panama Canal. Trump claimed that China is seeking control over the strategic waterway and asserted that the U.S. would not allow such a shift in power. Meanwhile, EU Foreign Policy Chief Kaja Kallas condemned the Iranian attacks on Bahrain and Kuwait as "unacceptable" and scheduled an emergency meeting with Gulf foreign ministers for next Monday.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.