Oil prices rose on Sunday following Iran’s decision to once again block most ships from passing through the Strait of Hormuz, a crucial waterway for a fifth of the world’s oil supply.
Brent crude, the global benchmark, surged about 7% to $96.88, rebounding from its lowest level since March 10 set on Friday when Iran initially announced the strait’s reopening. US crude also climbed 7% to $90.33.
However, the actual accessibility of the strait and which vessels would be permitted passage remained uncertain. Iran’s announcement of the strait’s closure on Saturday was followed by reports of Iranian gunboats firing at tankers trying to travel through the area. US President Donald Trump labeled this as a violation of the ceasefire, and emphasized that the US blockade effectively closed the strait.
In response, the US military fired “multiple shots” towards an Iranian-flagged ship attempting to breach the naval blockade. Concerns grew over a potential escalation of conflict in the near future as the US captured the Iranian vessel “Touska,” according to US Central Command.
Iran’s military warned of retaliatory action against what they called “US armed piracy.” Tracking data indicated that no tankers crossed the strait on Sunday.
Trump revealed that a US delegation was en route to Pakistan for peace discussions with Iran, emphasizing that he would not extend the ceasefire without an agreement by Wednesday. Iranian representatives were expected to arrive in Pakistan on Tuesday for talks, although Tehran had not confirmed their participation publicly.
Iran’s parliamentary speaker and lead negotiator Mohammad Bagher Ghalibaf acknowledged that Iran and the US were “far from a final agreement,” as he spoke on state television.
As gas prices in the US hit a national average of $4.05 per gallon on Sunday, Energy Secretary Chris Wright hinted that prices may not dip below $3 a gallon until “next year,” although he did not rule out the possibility of this occurring “later this year.”
In market repercussions, Dow futures plunged by 0.91% or 451 points, while S&P 500 and Nasdaq futures also showed a decline of around 0.8%.
