Oil Prices Surge as Washington Moves to Impose Blockade on Strait of Hormuz

SadaNews - Oil and natural gas prices have risen as the United States moves to impose a blockade on the Strait of Hormuz following failed weekend talks between Washington and Tehran to reach an agreement, exacerbating a global energy crisis that has shaken markets.

Brent crude rose by as much as 9.1%, approaching $104 per barrel, while European gas futures jumped by up to 18%.

The U.S. Central Command stated that U.S. forces would begin implementing the blockade, which applies only to ships entering or leaving Iranian ports, starting at 10 a.m. New York time on Monday.

Global energy markets have faced severe disruption due to the conflict, with rising oil and gas prices threatening to ignite inflation while slowing economic growth. Across the world, there is now a frantic race between refiners and traders to secure immediately available crude shipments amid dwindling actual supplies.

President Donald Trump told reporters that this measure would be very effective, after previously threatening to retaliate if Tehran resisted. In addition to the blockade, the president and his advisors were considering resuming limited strikes, according to a report from the Wall Street Journal.

Michael Ratney, former U.S. ambassador to Saudi Arabia, told Bloomberg Television that "this measure adds a huge additional element of risk." He added, "With some ships loaded with oil headed to China, will the U.S. Navy impose a blockade on them, thus leading to a crisis in U.S.-China relations?".

Supply Disruption and Increasing Geopolitical Risks

The Strait of Hormuz, which connects the Arabian Gulf to global markets, has been effectively closed since the start of U.S. and Israeli strikes on Iran at the end of February. Tehran has provoked the White House by tightening its grip on the strait, imposing payments on certain ships, and keeping traffic at rates much lower compared to pre-war levels.

Iran continued to ship crude oil and condensate from Gulf waters in March, with China being the main destination, although flows have decreased compared to the previous month, according to preliminary shipping estimates compiled by Bloomberg.

Mona Yacoubian, director of the Middle East Program at the Stimson Center, regarding the U.S. blockade plan said: "It seems to me that it's a very ambitious undertaking and does not resolve the disruption. It's hard to understand."

Traffic through the strait saw an increase on Saturday. However, on Sunday, two ships attempted to pass through the narrow passage before suddenly turning back, amidst failed negotiations in Islamabad.

Yacoubian stated that if Iran feels its oil exports are threatened, it might push the Houthis in Yemen to target traffic through the Bab el-Mandeb choke point, at the southern entrance of the Red Sea. The Houthis entered the war in late March and have the capability to disrupt shipping.

Negotiation Stalemate and Its Impact on Markets

The importance of oil flows through the Red Sea has increased since the war broke out, as Saudi Arabia has bolstered oil flows through pipelines across the country to the port of Yanbu.

Riyadh announced on Sunday that it has restored its full production capacity through the "East-West" pipeline, in addition to resuming production from the "Manifa" field, following Iranian attacks.

Haris Khurshid, chief investment officer at Karobar Capital in Chicago, stated that "the market rushed in its expectations about de-escalation," adding that the blockade threatens to slow shipping, delay the arrival of goods, and raise insurance costs. He concluded: "This is what actually leads to a shortage in the market and is reflected in prices."

OPEC is scheduled to release its monthly market report later on Monday, which may provide new insights into the extent of the disruption, following its previous warnings that damage to energy assets in the Middle East would negatively impact supplies for a long time even after the war ends.

The collapse of the talks represents a significant setback following the fragile ceasefire agreement reached last week. Iran described U.S. demands as "excessive," according to the semi-official Tasnim news agency.

U.S. Vice President J.D. Vance stated that Washington's primary goal was to obtain a commitment from Tehran not to seek nuclear weapons, but he returned to his country without achieving that.

Speaking to reporters at Joint Base Andrews, President Trump stated: "I don't care if they come back or not," in response to a question about how long he would wait for Iran to return to the negotiating table.