Oil prices climbed sharply on Monday after a United States seizure of an Iranian-flagged cargo vessel in the Gulf of Oman reignited doubts over a fragile ceasefire and revived fears that the struggle over the Strait of Hormuz could harden into a deeper threat to global energy flows. Brent crude rose about 6.8 per cent to $96.49 a barrel in early trade, while US West Texas Intermediate gained about 7.8 per cent to $90.38, reversing much of Friday’s sell-off as traders reassessed the risk of prolonged disruption. The immediate catalyst was the interception of an Iranian cargo ship that Washington said had tried to run a US blockade. Tehran denounced the action as piracy and signalled retaliation, while also casting doubt on further peace talks. That exchange has left the ceasefire looking increasingly brittle just days before it is due to expire, with each side accusing the other of violating understandings reached after weeks of conflict. The confrontation has sharpened the strategic contest over Hormuz, where control of maritime passage carries military, political and economic weight far beyond the Gulf.
Market nerves were amplified by the fact that the Strait of Hormuz remains the world’s most important energy choke point. The narrow waterway between Iran and Oman is only about 33 km wide at its tightest point, with shipping lanes roughly 3 km wide in each direction. Under normal conditions, about one fifth of the world’s oil and liquefied natural gas supply passes through it. The corridor is also critical for fertiliser feedstocks and refined products, making any interruption a broader inflation risk rather than merely an oil story.
The shock to prices has been driven not only by headline risk but by the stubborn weakness in physical shipping. Reuters reported that more than 20 vessels passed through Hormuz on Saturday, the highest number since March 1, yet that limited improvement has done little to restore confidence among owners and charterers. Separate Reuters reporting on Monday said shipping through the strait remains at a standstill in practical terms, underscoring the gap between diplomatic signalling and commercial reality. Traders, insurers and ship operators appear unwilling to treat verbal assurances as enough while attacks, seizures and counter-moves continue around the Gulf.
That caution reflects the wider backdrop of violence at sea. Since the war expanded at the end of February, commercial vessels in and around Hormuz have faced projectile strikes, fires, damage to hulls and engine rooms, and rising pressure from security warnings. Iran’s Revolutionary Guards have warned that ships using the route could be targeted, while the US Navy has reportedly resisted routine escort requests from the shipping industry because of the dangers involved. For oil markets, that means the premium on crude is being shaped as much by navigational risk and insurance costs as by outright supply loss.
Another layer of uncertainty lies in the mixed picture on exports. Even during the conflict, some Iranian barrels have continued to move. Reuters reported in March that crude and LPG cargoes were still leaving Iranian ports, often hugging waters under Tehran’s effective protection. That suggests the dispute is not a simple shutdown story. Instead, it has become a contest over which flows can move, under whose protection, and at what price. Gulf producers that rely heavily on Hormuz remain exposed, while importers in Asia are watching for signs that cargo delays could feed through into refinery margins, fuel costs and currency pressure.
The broader economic concern is that another sustained oil spike would arrive at an awkward moment for central banks and major consuming economies. Airlines and fuel buyers have already been warned that even a nominal reopening of Hormuz would not quickly normalise jet fuel supply chains because regional refining systems and shipping patterns have been disrupted for weeks. For governments across Asia, Europe and the Gulf, the danger is that a security crisis in one narrow channel could bleed into inflation, trade costs and investor confidence far beyond the Middle East.