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Oil markets react sharply to US blockade announcement
Global oil prices surged more than 7% on Monday after US President Donald Trump ordered a naval blockade of Iranian ports, following the collapse of peace negotiations between Washington and Tehran.
Price movements and market impact
Brent crude, the international benchmark, climbed to $102.30 per barrel, while West Texas Intermediate rose 8.7% to $104.94. The rally reversed a decline last Wednesday when a conditional two-week ceasefire had temporarily eased tensions and reopened the Strait of Hormuz, a critical chokepoint for global energy shipments.
Analysts warn the blockade could deepen the ongoing energy crisis, with ripple effects across fuel prices and industrial supply chains. The Strait of Hormuz handles approximately one-fifth of the world's oil and gas exports, making it a focal point in the conflict.
US and Iranian responses
Trump declared on Sunday that the US Navy would begin blocking all vessels attempting to enter or exit Iranian ports in the Strait of Hormuz starting at 15:00 BST (10:00 EST) on Monday. US Central Command clarified that the restrictions would not apply to ships transiting the strait for non-Iranian destinations.
The Unified Command of Iranian Armed Forces condemned the move as "illegal and piracy," vowing to establish a "permanent mechanism" to control the waterway in response to US threats.
International reactions
China urged restraint, emphasizing that the Strait of Hormuz is a vital trade route for global energy and goods. A foreign ministry spokesperson called for its security and stability to be maintained in the interest of the international community.
Economic and supply chain concerns
Economists suggest the blockade may be a tactic to pressure Beijing into mediating a ceasefire and restoring trade flows. However, the immediate impact on oil prices remains uncertain, depending on whether the blockade is fully enforced and whether diplomatic efforts resume.
"Oil prices are not as high as they might be given the scale of disruption, because traders still hope shipments will resume soon. But if that doesn't happen, prices will climb further,"
Saul Kavonic, MST Marquee
Beyond oil, the Strait of Hormuz is a critical conduit for other commodities, including 30% of the world's aluminium and helium, 50% of fertilizer feedstocks, and 17% of global polymers. Former US Special Envoy David Satterfield warned that prolonged disruptions could have far-reaching consequences beyond fuel costs.
Ceasefire uncertainty and market volatility
Markets remain cautious about whether the two-week ceasefire will hold. Marcus Baker, global head of marine and cargo at Marsh, noted that Iran's decision to honor the truce would be pivotal in restoring market confidence.
Stock markets reflected the uncertainty, with European indexes opening lower. The UK's FTSE 100 dropped 0.5%, while France's CAC 40 and Germany's DAX both fell 1%. In Asia, Japan's Nikkei 225 closed 0.7% lower, and South Korea's Kospi declined 0.9%. Asian economies, heavily reliant on Middle Eastern oil, have been particularly vulnerable to the conflict's fallout.
Iranian oil exports continue despite tensions
Despite the blockade, Iran has maintained oil exports. Maritime intelligence firm Windward reported that over 58 million barrels of crude left Iran's Kharg Island since March 1, with more than 90% destined for China.
