Investing.com – Oil prices climbed on Monday following U.S. claims that it had seized an Iranian cargo ship, while Tehran said the Strait of Hormuz was once again closed to tanker traffic.
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Brent oil futures, the global benchmark, were last higher by 4.9% at $94.77 a barrel, while U.S. West Texas Intermediate crude futures ticked up by 5.8% to $87.33 a barrel.
U.S. President Donald Trump said the military had fired on an Iranian-flagged cargo ship that tried to run a U.S. blockade, and had seized the vessel.
Iran decried the move and vowed retaliation, state media showed. This was after Iran was said to have reopened the Strait of Hormuz over the weekend, only to shutter it hours later. Oil tumbled over 9% on Friday after Iran’s foreign minister and Trump both announced the reopening.
Tehran have reportedly fired on several vessels attempting to cross the channel. The developments pointed to worsening tensions between the U.S. and Iran, and raised questions over whether more peace talks were even possible before a two-week ceasefire ends later this week.
The U.S.-Israel war on Iran entered its eighth consecutive week, with the weekend developments presenting little scope for immediate de-escalation. Persistent disruptions in oil flows through the Strait of Hormuz are expected to keep crude prices underpinned in the coming days.
Roughly a fifth of the world’s oil passes through the strait, a narrow waterway off of Iran’s southern coast.
“Markets may have priced an overly swift resumption of energy flows. The standoff looks set to drag on as both sides test pain thresholds. Near term, some risk wobble and a U.S. dollar rebound are likely,” OCBC analysts said in a note.
Still, they noted that the endgame remained a deal, “albeit via a messy path of brinkmanship with elevated tail risk.”
Oil had surged to nearly $120 a barrel following the onset of the war, but trimmed a bulk of its gains in the past two weeks after Trump touted peace talks with Tehran.
Additional peace talks unclear as ceasefire end looms
It remained unclear whether additional talks between the U.S. and Iran will take place before their ceasefire expires on Tuesday.
Trump said U.S. envoys would arrive in Pakistan on Monday evening for more talks, led once again by Vice President JD Vance.
But Iranian state media reported that Tehran had rejected more peace talks. The Tasnim news agency reported that Tehran had not made any decision to dispatch a negotiating delegation to Islamabad, and that no talks would take place as long as a U.S. naval blockade remained.
The U.S. blockaded all Iranian vessels and ports last week, likely as a bid to further pressure Iran into a ceasefire deal. This came after Pakistan-hosted ceasefire talks held last weekend yielded little progress.
(Ambar Warrick contributed reporting)