Investing.com — Oil prices advanced more than 5% on Monday after the U.S. seized an Iranian-flagged cargo vessel, while Tehran said the critical Strait of Hormuz was once again closed to tanker traffic.
At 14:55 ET (18:55 GMT), , the global benchmark, were up 5.7% to $95.49 a barrel, while gained 5.8% to $87.38 a barrel.
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Iranian cargo ship fired upon, boarded, and seized
U.S. Central Command on Sunday said American forces fired upon, boarded, and took into custody an Iranian-flagged cargo vessel named M/V Touska. Following the ship’s failure to comply with repeated warnings over a six-hour period, the U.S. military fired several rounds and disabled the vessel’s engine room.
President Donald Trump noted the seizure on social media. Earlier in the day, the president said Iran had fired bullets in the Strait of Hormuz, mainly targeting a French ship and a freighter from the UK. Trump called the move “A Total Violation of our Ceasefire Agreement!”
Iran decried the seizure and vowed retaliation, state media said. This was after Iran reportedly reopened the strait over the weekend, only to shutter it hours later. Tehran also reportedly fired on several vessels attempting to cross the channel. The reopening had been announced on Friday, sending a wave of relief across asset classes, with oil prices tumbling over 9%.
“A reescalation of Middle East tensions is blowing bearish winds across Wall Street as investors consider the risk that the US-Iran conflict could be prolonged. Another shutdown on the Strait of Hormuz is bottlenecking the flow of critical energy supplies, as Tehran and Washington grapple along the pivotal waterway, even involving strikes in the past two days just as the ceasefire is set to expire this Wednesday,” José Torres, senior economist at Interactive Brokers, said.
Trump on Monday told Bloomberg News that it was “highly unlikely” he would extend the ongoing two-week ceasefire with Iran if a deal was not reached before the current deadline, which he confirmed was “Wednesday evening Washington time.”
Blockade to stay until deal, costing Iran $500 million a day
Roughly a fifth of the world’s oil passes through the Strait of Hormuz, 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,” analysts at OCBC said in a note.
Still, they noted that the endgame remained a deal, “albeit via a messy path of brinkmanship with elevated tail risk.”
The U.S. blockade of ships entering and exiting Iranian ports started a week ago following a failed first round of negotiations between Washington and Tehran. CENTCOM on Monday said since the start of the blockade, a total of 27 vessels have been told to turn around or return to an Iranian port.
Trump on social media said the blockade would stay in effect until a deal with Iran was made. The president added that the blockade was “absolutely destroying Iran” and that the country was “losing $500 Million Dollars a day, an unsustainable number, even in the short run.”
Additional peace talks unclear as ceasefire end looms
Speaking of a deal, it remained unclear whether additional talks between the U.S. and Iran would take place before the expiration of the ceasefire. Market participants received contrasting media reports about the fate of the talks.
Trump told Bloomberg News that Vice President JD Vance would be leaving later in the day to resume peace talks in Pakistan.
But the New York Post earlier reported that Vance would actually be leaving to Pakistan on Tuesday, citing people familiar with the matter. Trump previously told the paper that the U.S. delegation would be in Pakistan “tonight.”
Meanwhile, CNN reported that the White House had offered no clear indication of timing, saying the delegation would be “on the road soon but unclear when.”
Iranian state media reported that Tehran had rejected more peace talks. However, the New York Times reported that an Iranian delegation was considering traveling to Pakistan on Tuesday for further negotiations, citing two senior Iranian officials familiar with the plans.
Ambar Warrick and Scott Kanowsky contributed to this article