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Oil markets react to US-Iran tensions in Hormuz Strait
Global oil prices climbed sharply Monday after the US Navy intercepted and seized an Iranian-flagged cargo ship in the strategically vital Strait of Hormuz, reversing a brief easing of tensions over the weekend.
Brent crude jumps 5% amid fluctuating strait access
The Brent crude benchmark rose 5% to approximately $95 per barrel, erasing Friday's losses when Iran declared the strait would remain open to commercial traffic under a temporary ceasefire. By Saturday, Tehran reversed course, announcing the waterway was closed again and warning approaching vessels would be targeted.
The Strait of Hormuz, through which roughly 20% of the world's oil and liquefied natural gas typically passes, has become a flashpoint since the US and Israel launched strikes against Iran on February 28. Tehran retaliated with threats to disrupt shipping in the area.
Diplomatic efforts stall as Iran rejects talks
US officials confirmed a delegation led by Vice President JD Vance would travel to Pakistan Monday for negotiations. However, Iran's state media reported Tehran had "no plans for now" to participate, though its position remained unclear.
Analysts noted markets were reacting more to shifting rhetoric than tangible developments. "Oil markets continue to gyrate in response to oscillating social media posts by the US and Iran, rather than the realities on the ground," said Saul Kavonic of MST Marquee. "This is all part of negotiations playing out in real time on the strait."
Markets show fatigue amid mixed signals
Shanti Kelemen, co-chief investment officer at 7 Investment Management, described market sentiment as weary of the "chopping and changing." She suggested traders were now prioritizing actions over statements. "The market stopped believing the words and will look more toward the actions," she told the BBC.
The strait remained closed Sunday after Iran's Islamic Revolution Guard Corps accused the US of violating ceasefire terms with its naval blockade. Tehran vowed to keep the waterway shut until the blockade ended, while President Trump insisted Friday it would continue until a deal was reached.
Global markets respond unevenly
Stock markets showed mixed reactions Monday. European indices declined, with London's FTSE 100 down 0.7%, while Germany's Dax and France's Cac 40 fell over 1%. In contrast, Asian markets rose earlier in the day, with Japan's Nikkei up 0.6% and South Korea's Kospi gaining 0.4%.
Energy crisis deepens across Asia
Volatile oil prices since the conflict began have triggered a global energy crisis. Brent crude, which traded near $70 per barrel before the war, spiked to nearly $120 on March 9. The current June futures contract reflects ongoing uncertainty.
Asia has been particularly affected, relying on Hormuz shipments for about 90% of its energy needs. Governments have imposed emergency measures, including remote work mandates, shortened workweeks, and early university closures to conserve fuel. Southeast Asian nations like Singapore and Thailand urged citizens to reduce air conditioning use.
Even China, with reserves estimated at three months' worth of imports, has capped fuel price increases after a 20% hike. Airlines across the region have also introduced cost-saving measures amid soaring jet fuel prices.
IEA warns of looming jet fuel shortages
The International Energy Agency's chief, Fatih Birol, warned last week that Europe might have only six weeks of jet fuel left if supplies remain blocked, raising the specter of widespread flight cancellations. In the UK, petrol and diesel prices eased slightly after a series of recent hikes.
