Oil Prices Surge as Hormuz Disruption Intensifies, Iran Threatens Retaliation Amid Fading Ceasefire Hopes

Global Markets Turn Cautious as Iran Tensions Disrupt Shipping Through Strait of Hormuz

Oil prices jumped sharply on Monday as the US dollar rebounded and global markets turned cautious due to renewed Iran tensions that disrupted shipping through the Strait of Hormuz, a key artery for global energy flows, just days before a ceasefire deadline.

Brent crude rose approximately 6 percent to around $96 a barrel in early Asian trade, while the dollar index climbed to a one-week high as investors moved toward safer assets. S&P 500 futures fell about 0.7 percent, and Asian markets were mixed, reflecting a measured but clear shift in risk sentiment.

The moves followed fresh geopolitical developments over the weekend, after the United States seized an Iranian cargo ship, prompting Tehran's military command to warn of retaliation and reject further peace talks. This escalation has led to a significant slowdown in shipping through the Strait of Hormuz, with data from Kpler showing more than 20 vessels carrying oil, gas, metals, and fertiliser transited the strait on Saturday, the highest since March 1.

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Market analysts note that the Strait of Hormuz has become a critical barometer of geopolitical risk, with shipping disruptions serving as a key market signal.

Despite the rise in oil and safe-haven demand, analysts said markets were not yet positioning for a prolonged disruption. However, the dollar index rose as much as 0.3 percent to 98.485, reversing losses seen when the strait briefly reopened on Friday. The euro slipped to around $1.1731, while the yen weakened to about 159 per dollar. The Australian and New Zealand dollars also declined.

Bond markets retraced part of their recent rally, with the 10-year US Treasury yield rising about 3.2 basis points to 4.276 percent after falling sharply in the previous session.

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The latest tensions come just ahead of a ceasefire linked to the Iran conflict that is due to run until Tuesday. The US President had said the US military had seized an Iranian cargo vessel that attempted to bypass a naval blockade, while Iran later said it would not participate in a second round of peace talks and warned of retaliation.

Investors are tracking Gulf shipping flows as a real-time signal of supply disruption, alongside a heavy week of global economic data including US retail sales, UK inflation, and European PMI readings. Wall Street indexes had closed at record highs on Friday, supported by expectations of strong corporate earnings, leaving markets sensitive to any geopolitical developments that could affect inflation and growth expectations.