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Oil surges, stocks sink as Donald Trump orders Strait of Hormuz blockade

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2 months ago

ISLAMABAD: Oil prices rose and stocks plunged on Monday after U.S.-Iran peace talks collapsed and Donald Trump announced a blockade of the strategic Strait of Hormuz, raising concerns about energy supplies from the Middle East.

Negotiations with a U.S. delegation in Islamabad over the weekend — led by Vice President J.D. Vance — collapsed over Iran’s refusal to give up its nuclear program and Tehran accused it of “maximizing, shifting goalposts, and blockades.”

The news dealt a blow to hopes of an end to the six-week dispute, which has sent crude prices soaring, fueled inflation and rattled the global economy.

Oil prices — which had fallen after the United States and Iran agreed to a ceasefire last week — rose nearly eight percent on Monday, with both deals reaching $100 a barrel.

Equities fell across Asia, with Tokyo, Hong Kong and Seoul down at least 1 percent, while Shanghai, Sydney, Singapore, Taipei and Jakarta also fell.

In a lengthy social media post, US President Donald Trump said his goal was to clear the strait of mines and reopen it to all shipping.

But he said Iran should not be allowed to benefit from controlling the waterway — through which a fifth of the world’s oil and gas normally passes.

“Immediately, the United States Navy, the finest navy in the world, will begin the process of blocking all ships attempting to enter or leave the Strait of Hormuz,” Trump wrote on Truth Social.

“Any Iranian who fires a shot at us, or at peaceful vessels, will be blown to hell!”

He said the blockade would only apply to ships that were or were about to enter Iranian ports.

The US military said on Sunday it would blockade all Iranian Gulf ports at 1400 GMT on Monday, effectively controlling sea traffic.

Iran’s Revolutionary Guards said its security forces had full control of the strait and warned enemies that any “wrong move” would lead them into a “deadly whirlpool.”

Iran’s navy chief, Shahram Irani, called Trump’s threat “ridiculous and ridiculous,” according to state TV.

After the talks — the highest-level meeting between the two sides since the 1979 Islamic Revolution — Vance said Washington had made Tehran its “final and best offer,” adding: “We will see if the Iranians accept it.”

Iranian Foreign Minister Abbas Araqchi said the rivals were “inches away” from a deal, writing on X that “Iran is engaged with the US in good faith to end the war.”

But he added that “we have encountered more and more favoritism, changing goalposts, and blockades.”

Nicole Grejowski, assistant professor at the Center for International Research at Sciences Po in Paris, warned that the US blockade was “not a sign of modest coercion” but would be seen as an effective resumption of war.

“The fundamental issue is the trust – or lack thereof – between the two long-time adversaries, who still seem to be some way off common ground,” said Forex.com market analyst Fawad Razzakzadeh.

Investors are also keeping an eye on efforts to resolve the conflict between Israel and Hezbollah, as Lebanese Prime Minister Nawaf Salam said he was pushing to ensure the withdrawal of Israeli forces.

“We will continue to work to stop this war, to ensure the Israeli withdrawal from all our lands, the return of all prisoners, the reconstruction of our destroyed villages and towns, and the safe return of those displaced,” Salam said.

The prospect of a prolonged Middle East crisis for the foreseeable future raised inflation concerns and weighed on gold amid expectations that interest rates would remain high.

Friday’s data highlighted the impact of the conflict on prices, with the U.S. consumer price index rising 3.3 percent in March, the most since May last year.