U.S.-Iran Ceasefire on Brink as Seized Ship and Vessel Attacks Escalate

Tensions Escalate Again in the Gulf

Fifty days into the U.S.-Israel war with Iran, tensions escalated again after clashes in the Gulf prolonged shipping disruptions and cast doubt on a fragile ceasefire set to expire this week.

Strait of Hormuz Reopens and Then Closes Again

On Friday, Iran declared the Strait of Hormuz fully open to commercial traffic, sending crude prices tumbling more than 10%. By Saturday, hopes for a fully opened artery quickly unraveled as Tehran reimposed closure of the chokepoint, after President Donald Trump refused to end the U.S. naval blockade of Iranian ports.

Vessels Under Fire, Shipping Traffic Stalls

After a brief pickup in transit attempts on Saturday, shipping traffic in the Gulf stalled once again, with vessels coming under fire mid-passage and being forced to withdraw.

U.S. Navy Seizes Iranian Container Ship

On Sunday, the U.S. Navy fired on and seized an Iranian container ship in the Gulf of Oman. Trump called Iran’s actions over the weekend a “total violation” of the truce and renewed threats to strike Iranian power plants and bridges if Tehran refuses a deal.

Markets React to Escalating Tensions

U.S. stock futures fell while crude oil prices surged as the U.S. and Iran teetered on the brink of a renewed conflict. West Texas Intermediate futures jumped more than 6% to $89 per barrel shortly after midnight on Monday, while Brent climbed 5.6% to $95.50 a barrel.

Experts Warn of Escalatory Predisposition

“We had the most violent day in the strait on Saturday that we’ve had since the beginning of this crisis, and things don’t seem to be getting any better,” said Rory Johnston, founder of Commodity Context.

“The strait still isn’t flowing, and 13 million barrels a day of production remains shut-in. We’re losing it every single day this goes on,” Johnston told CNBC’s “Squawk Box Asia” on Monday.

Fragile Ceasefire at Risk

Much will hinge on whether the U.S. and Iran will meet for a second round of peace negotiations in Pakistan later this week, as the ceasefire is set to expire on Tuesday.

Underlying Differences Remain

Trump said that the American and Iranian negotiators would resume talks in Islamabad on Monday. Iran, however, has denied that it would participate in the meeting, citing what it called Washington’s “excessive demands, unrealistic expectations, constant shifts in stance” and the ongoing blockade as a breach of the ceasefire.

Economic Costs Mounting

The economic costs of the conflict are mounting as the Strait of Hormuz — which normally carries roughly one-fifth of global oil supply — has been effectively closed for nearly two months.

“The crisis is one of lost time and lost production,” Johnston said, estimating supply disruptions of around 13 million barrels of crude, condensates, and natural gas liquids per day.

Experts Warn of Lingering Adverse Effects

“Even if a deal is reached, experts warn that it could take months to claw back the supply lost over recent weeks of closures, keeping oil prices elevated for longer,” said Vishnu Varathan, head of macro research at Mizuho Bank.

Global Economy Takes a Hit

The International Monetary Fund warned on Tuesday that global growth will inevitably take a hit even if the ceasefire holds, citing uncertainty around the Strait of Hormuz as a persistent drag, pushing up energy costs and inflation.

Data Provided by:

• LSEG (Lloyds Securities Exchange Group)
• Kpler
• Mizuho Bank
• Foard Asset Management