MARY LOUISE KELLY, HOST:
A Pakistani-flagged oil tanker has become the first ship to pass through the Strait of Hormuz since Iran and the U.S. imposed their respective blockades. Today, Iran said the Strait of Hormuz is finally open to commercial vessels but with one condition - ships must coordinate their transit with Tehran. President Trump thanked Iran for opening the waterway but said the U.S. will continue its own blockade of Iranian shipping until a full deal with Iran is complete. Well, shipping companies are scratching their heads over what this means for their vessels. And with facts on the ground - or make that facts in the sea - rather hard to establish, leaders of dozens of countries joined a meeting in Paris on how to keep the Strait of Hormuz open. We're gonna talk all this through with NPR chief economics correspondent Scott Horsley. Hey, Scott.
SCOTT HORSLEY, BYLINE: Hi.
KELLY: And London-based NPR reporter Fatima Al-Kassab. Hi there.
FATIMA AL-KASSAB, BYLINE: Hi.
KELLY: Fatima, you kick us off. I'm curious how this is playing, what kind of reaction you're hearing there in Europe to these latest developments.
AL-KASSAB: Yeah. European leaders are still trying to make sense of this. The announcement actually came during a meeting chaired by French president Emmanuel Macron and British Prime Minister Keir Starmer in Paris today. Now, this meeting was supposed to be looking at ways countries can help with the full reopening of the strait once it is safe. Italy's Giorgia Meloni was also there, as was the German Chancellor Friedrich Merz. Macron said 49 countries had taken part, some virtually. Crucially, though not the U.S., Israel or Iran. And while they were in this meeting in the Elysee, the news came that Iran was reopening the strait for the remainder of the ceasefire, which in some way - some ways highlighted how they've kind of been on the margins of this with the action happening elsewhere. But today British Prime Minister Keir Starmer - when he spoke after the meeting, he welcomed the announcement, and he said it actually just reinforced what these countries gathered in Paris were trying to do, to get a long-lasting and workable solution, he said, to guarantee the full, toll-free, restriction-free reopening of the strait.
KELLY: OK, so welcoming the announcement - are there any concrete actions coming next?
AL-KASSAB: Yeah, Starmer also announced that the U.K. and France would lead a multinational military mission to protect shipping in the Strait. He said that that would include clearing out mines, having warships escort tankers through. But he stressed this would be strictly peaceful and defensive. I spoke to Tom Sharpe. He used to be a Royal Navy commander. He's commanded a warship in the Persian Gulf. And he told me what he thought this mission could achieve.
TOM SHARPE: There is an assurance part of this that having other nations warships around will provide, but they are not in control of this. Iran has the whip hand here, and if they choose to start challenging the strait again, they will do so.
AL-KASSAB: And Starmer said today that more than a dozen other nations had agreed to contribute assets to this defensive military mission.
KELLY: A defensive military mission - OK, Scott, are the markets liking this?
HORSLEY: Yeah, very much so. Stock prices soared, and oil prices tumbled. The Dow jumped about 870 points today, and the benchmark price of crude oil in the U.S. fell to about $83 a barrel. Now, I'll say the stock market, even before today's news of the strait reopening, was kind of giddy. The S&P 500 index hit a record high several times this week.
KELLY: Yeah.
HORSLEY: Until today, though, oil markets had been a little more cautious. It will certainly be a relief if oil tankers and other traffic is once again able to move freely through the strait. But, you know, this is not like flipping a light switch. Some of the oil fields that were shut in over the last six weeks are going to take time to start producing again. Some of the infrastructure that was damaged during the war is going to have to be rebuilt. So I wouldn't expect gasoline prices to fall all the way back to $3 a gallon overnight. At least, though, we might avoid some of the more serious shortages that had been looming had the strait remained closed.
KELLY: And then aside from gas prices, aside from the markets, how's the broader economy tracking this?
HORSLEY: Well, if the strait remains open long term - and I will underscore if - that would remove a sort of cloud of uncertainty that's been hanging over the economy. You know, when families or businesses are making plans, they like to have some idea of what to expect, and it's really hard to make a big purchase or plan a vacation or make an investment or hire a new worker if you don't know what your energy bill is going to look like in the next month or two.
KELLY: Sure.
HORSLEY: The good news is, even as gas and diesel prices soared over the last six weeks, we didn't see people cutting back very much in other spending. Most people kept spending money on travel and restaurants even as they were having to pay more at the pump. And that's important because that consumer spending is the biggest driver of the U.S. economy. Now, some of that extra spending was being propped up by tax refunds, and those only come once a year. So it would be a relief if gas prices come down before that refund money is all spent, especially for lower-income families who have been hit hardest by this price spike. Opening the strait could restore a measure of predictability, although predicting what the president might do is never easy.
KELLY: So, Fatima, let me throw a big question at you to try to connect all this up. Everything Scott is sharing about the economy - it prompts me to wonder, did economic pressure make the Europeans and others decide now to get involved?
AL-KASSAB: Yeah, economic pressure and political pressure that's been growing on European leaders because of what this war and the closure of the Strait of Hormuz was already doing to the global economy. The IMF this week warned it could plunge the global economy into recession, and the U.K. was forecast to be the hardest hit among the world's major economies from the fallout of this. Prime Minister Keir Starmer said in the past week that he was fed up. He actually compared Trump to Russian President Vladimir Putin, saying he was angry that Trump's actions in going to war with Iran was costing Brits at home, comparing it to Russia's invasion of Ukraine, which hiked up energy prices. So European leaders have been increasingly vocal in their frustration. Macron said today, incidentally, that the closure of the Strait of Hormuz had affected the whole planet.
And while the leaders gathered in Paris today - either in person or virtually - were united in their willingness to do something about this and join a military mission to secure the strait, there are still some disagreements about how that will work. For example, Chancellor Friedrich Merz of Germany said Germany would be willing to contribute militarily but only with a formal international mandate for the mission, preferably from the United Nations Security Council. He also said he'd like to see the U.S. involved, whereas Macron of France has said the mission should not involve what he called the belligerents. What they all agree on, though, is this is all contingent on these fragile ceasefires turning into a lasting peace. And next week in London, Starmer said there will be a defense planning meeting where he said more detail will be announced on the military mission.
KELLY: That is NPR London-based reporter Fatima Al-Kassab and chief economics correspondent Scott Horsley. Thanks to you both.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.
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