Global oil prices surged sharply on Monday while stock markets tumbled after tensions escalated between the United States and Iran, following the collapse of peace talks and a dramatic announcement by Donald Trump to blockade the strategically vital Strait of Hormuz.
The move came after high-level negotiations in Islamabad broke down over the weekend. The US delegation, led by Vice President JD Vance, blamed Iran for refusing to abandon its nuclear programme, while Tehran accused Washington of making unrealistic demands and shifting its negotiating terms.
The collapse of talks dashed hopes for a resolution to the six-week conflict, sending shockwaves through global markets. Oil prices, which had briefly eased after a ceasefire agreement, surged by more than eight percent, with benchmark crude rising above $100 per barrel.
Equity markets reacted negatively across Asia and Europe, with major indices in Tokyo, Hong Kong, Seoul, Sydney, and London recording significant losses as investors fled riskier assets amid growing uncertainty.
In a social media post, Trump declared that the United States Navy would immediately begin enforcing a blockade on vessels entering or leaving Iranian ports via the Strait of Hormuz—a critical chokepoint through which roughly one-fifth of global oil and gas supplies pass. He warned of severe consequences for any hostile actions against US forces or commercial shipping.
Iran responded swiftly, with its military insisting it maintained full control over the waterway. Iranian naval authorities dismissed the US threat as baseless, while the country’s leadership warned that any escalation could trigger serious consequences in the region.
Iran’s Foreign Minister, Abbas Araghchi, said both sides had been close to reaching an agreement but accused the US of undermining progress with what he described as “maximalist” demands.
Analysts warn that the blockade signals a potential escalation rather than a de-escalation of hostilities, raising concerns about prolonged disruptions to global energy supply. Experts also caution that even if a diplomatic breakthrough is achieved, oil production and supply chains could take weeks or months to stabilise.
The ongoing crisis has intensified inflation fears globally, with rising energy costs expected to keep interest rates elevated and prolong economic uncertainty.
