Oil prices rose on Monday after the U.S. Navy imposed a blockade on Iranian ports, following the failure of peace talks between Washington and Tehran over the weekend.

U.S. crude futures for May delivery rose by more than 2% to close at $99.08 per barrel, while Brent crude for June delivery rose by more than 4% to reach $99.36 per barrel.

The blockade went into effect at 10:00 AM Eastern Time (ET), as U.S. Central Command confirmed that forces would not obstruct ships destined for or coming from non-Iranian ports.

U.S. Central Command (CENTCOM) said in a statement: “The blockade will be implemented equally against ships of all nations entering or leaving Iranian ports and coastal areas, including all Iranian ports in the Arabian Gulf and the Gulf of Oman.”

Escalation after the collapse of Pakistan negotiations

The decision came after U.S. President Donald Trump issued an order to impose the blockade following the failure of the United States and Iran to reach an agreement to end the war during talks held in Pakistan over the weekend.

Trump threatened on Monday to destroy any Iranian military vessel that approaches the blockade areas.

The President said he ordered the U.S. Navy to intercept any vessel in international waters that has paid transit fees to Iran to pass through the Strait of Hormuz, a vital maritime corridor linking Middle Eastern oil producers to global energy markets.

Iran responds and mutual threats

In response, Iranian forces threatened to target ports across the Arabian Gulf in retaliation for the U.S. blockade, according to Iran's state-run Press TV.

Oil tanker traffic through the Strait of Hormuz has declined sharply due to the risks of attacks, leading to the largest disruption of oil supplies in history, as about 20% of global oil supplies passed through the Strait before the outbreak of war between the United States, Israel, and Iran on February 28.

Ambiguity regarding military escalation

It remains unclear whether Trump will resume airstrikes on Iran, although he agreed last week to a temporary two-week truce in exchange for allowing ships to pass through the Strait.

He had previously threatened to bomb bridges and power stations in Iran.

The Wall Street Journal quoted officials saying that Trump is considering carrying out limited strikes to break the deadlock in negotiations.

Decline in shipping traffic and crisis in the Strait of Hormuz

Tehran said that the passage of ships during the truce is conditional upon its approval, while Ali Akbar Velayati, advisor to the Iranian Supreme Leader, confirmed that “the key to the Strait of Hormuz remains in the hands of the Islamic Republic,” according to Press TV.

Data from LSEG showed that only three supertankers crossed the Strait on Saturday, despite their capacity to carry up to two million barrels per ship, while numbers exceeded 100 ships per day before the war.

Disagreements in negotiations and fears of a continued crisis

U.S. Vice President JD Vance, who led the U.S. delegation, said that negotiations failed because Iran refused to provide an “explicit commitment” not to seek a nuclear weapon.

He added: “The simple question is: do we see a real commitment from the Iranians not to develop a nuclear weapon? We haven’t seen that yet, and we hope it changes.”

On the other hand, Iranian Parliament Speaker Mohammad Baqer Qalibaf said that the United States “failed to win the trust of the Iranian delegation in this round of negotiations.”

Market expectations

Commodity fund manager at Schroders, Malcolm Melville, said that markets need a significant increase in ship movements over the next two weeks to convince investors that the crisis has ended.

He added that if traffic returns to about 75% of pre-war levels, it could be considered a near-normal return of supplies, especially with the use of some alternative pipelines that were not previously operating at full capacity.

Oil prices rose again above the level of $100 per barrel on Monday, as the U.S. Navy prepares to impose a blockade on ship movements to and from Iran through the Strait of Hormuz, in a step that may restrict Iranian oil exports, following the failure of Washington and Tehran to reach an agreement to end the war.

Brent crude futures climbed by $6.81, or 7.2%, to reach $102.01 per barrel by 11:29 GMT, after having closed down 0.75% on Friday. U.S. West Texas Intermediate (WTI) crude also rose by $7.50, or 7.8%, to $104.07, after declining 1.33% in the previous session.

U.S. President Donald Trump said on Sunday that the U.S. Navy would begin imposing a blockade on the Strait of Hormuz, representing a major escalation after prolonged talks with Iran failed to end the war, and threatening the fragile two-week truce.

Trump added that oil and gasoline prices may remain high until the midterm elections in November, in a rare acknowledgment of the potential political repercussions of his decision to attack Iran six weeks ago.

Erik Meyersson, an analyst at SEB bank, said: "The announced U.S. blockade represents an admission that the basic premise of the truce—at least from the U.S. perspective—which was the reopening of the Strait, is currently unviable."

U.S. Central Command announced that U.S. forces would begin implementing the blockade on all maritime traffic entering and exiting Iranian ports starting at 10:00 AM Eastern Time (14:00 GMT) on Monday.

It added that the blockade will be "applied neutrally to ships of all nations entering or leaving Iranian ports and coastal areas, including all Iranian ports on the Arabian Gulf and the Gulf of Oman," according to a statement published on the X platform.

At the same time, the Command confirmed that U.S. forces will not impede the freedom of navigation for ships traveling to and from non-Iranian ports through the Strait of Hormuz.

For its part, Iran's Revolutionary Guard Corps warned on Sunday that any military vessels attempting to approach the Strait of Hormuz would be considered in violation of the truce and would be dealt with "firmly and forcefully."

In physical markets, crude oil shipments are trading at significant premiums compared to futures contracts, with some grades already reaching record levels near $150 per barrel.

Helima Croft, an analyst at RBC Capital Markets, said: "If President Trump moves forward with implementing the blockade threat using actual ships, we may soon see a convergence between paper market prices (futures) and physical market prices."

Shipping data showed that oil tankers began avoiding passage through the Strait of Hormuz ahead of the start of the U.S. blockade, while three supertankers fully loaded with oil crossed the Strait on Saturday, in the first such movement since the ceasefire agreement was announced last week.

In a related context, Saudi Arabia announced on Sunday that it had restored its full oil pumping capacity through the East-West pipeline to about 7 million barrels per day, following the damage sustained by the energy sector during attacks associated with the conflict with Iran.

The U.S. dollar rose against other major currencies during thin trading late Sunday, as investors pivoted toward the American currency as a relatively safe haven, following the failure of prolonged talks between Washington and Tehran to reach a peace agreement, plunging markets into a seventh week of uncertainty.

U.S. President Donald Trump said on Sunday that the U.S. Navy would begin imposing a blockade on the Strait of Hormuz, a vital corridor for about 20% of the world's daily energy supplies, which Iran has effectively closed to traffic since the outbreak of war in late February. This has led to a jump in oil prices of more than 30%, increasing concerns about a broad wave of inflation.

The dollar, which is viewed as a safe haven due to the low exposure of the United States to imported energy price inflation, rose as Asian markets opened, pushing the euro down by 0.53% to $1.1663, while the dollar climbed 0.1% against the Japanese yen to reach 159.43.

The United States and Iran had announced a two-week truce on April 7, which investors initially welcomed by selling oil and redirecting some investments toward riskier assets like stocks. However, anxiety over the fragility of this agreement prompted a reversal of those investment positions later.

Fiona Cincotta, senior market analyst at City Index, said that what is happening now is a "complete dismantling of any optimism that preceded the peace talks, and a return to the scenario of the dollar as a safe haven, with oil rising and an exit from other assets."

She added that markets sometimes tend to overreact, especially in light of this significant amount of uncertainty, noting that pricing these developments still represents a major challenge for investors.

In contrast, currencies most sensitive to risk, such as the Australian dollar and the British pound, came under strong pressure, falling by 1.1% and 0.5% respectively.

As expectations of a return to rising inflation escalate, investors have priced in the probability of several central banks, such as the European Central Bank and the Bank of England, resorting to raising interest rates this year, in a sharp shift compared to previous expectations before the outbreak of the war, which indicated stable or even lower interest rates.

As for global stocks, which ended last week near their highest levels since early March supported by optimism regarding the possibility of reaching a settlement, they remain about 2% lower compared to their levels before the outbreak of the war.

At the same time, gold has lost about 10% of its value since late February, as investors prefer the dollar as the primary safe haven at the moment.

Silver prices lost nearly 4.5% in European markets on Monday to move away from three-week highs, on track to incur their first loss in the last five days, due to correction and profit-taking operations, in addition to pressure from the rise of the U.S. dollar after the collapse of peace talks between the United States and Iran in Pakistan.

With the escalation of U.S. threats to impose a naval blockade on the Strait of Hormuz and Iranian ports, global oil prices jumped by more than 10%, in a development that brings concerns of accelerating global inflation back to the forefront and increases pressure on the Federal Reserve to raise interest rates in the near term.

Price overview

• Silver prices today: Silver metal prices fell by about 4.5% to ($72.63), from the opening level of trading at ($75.93), and recorded a high of ($75.93).

• Upon price settlement on Friday, silver prices achieved an increase of 0.8%, in their fourth consecutive daily gain, near a three-week high of $77.65 per ounce, supported by the decline of the U.S. dollar.

• During the past week, silver prices achieved an increase of 4.0%, in the third consecutive weekly gain, after the announcement of the two-week truce in the Iranian war.

The U.S. Dollar

The dollar index rose on Monday at the start of the week's trading by 0.5%, beginning a broad recovery from its lowest levels in a month, reflecting the rise in the levels of the American currency against a basket of global currencies.

Aside from buying operations from low levels, U.S. dollar levels rose due to fears of renewed war in the Middle East region after the collapse of peace talks between the United States and Iran in Pakistan.

Saul Kavonic, an analyst at MST Marquee, said: The market has now largely returned to its status before the ceasefire.

Updates on the Iranian war

• The talks between the United States and Iran in Islamabad ended in a deadlock.

• Washington's insistence on a complete dismantling of what remains of uranium enrichment facilities in Iran.

• Tehran's demand for an immediate lifting of all economic sanctions before extending the truce.

• Trump says that the United States will impose a blockade on the Strait of Hormuz after the failure of peace talks with Iran.

• Trump ordered the U.S. Navy to impose a blockade on the Strait of Hormuz starting at 10:00 AM U.S. Eastern Time on Monday.

• Trump believes that Iran will continue the dialogue; Tehran seeks a "balanced and fair agreement."

• Iran warns of a harsh response to the blockade and accuses the United States of being intransigent in negotiations.

• The Wall Street Journal reported that Trump and his advisors are considering launching limited strikes on Iran.

Global oil prices

Oil prices jumped by more than 10% on Monday after the failure of U.S.-Iranian talks to reach an agreement, leaving the fragile ceasefire hanging and continuing to choke energy exports from the Middle East.

Undoubtedly, the rise in global oil prices renews fears of accelerating inflation, which may push global central banks, especially the Federal Reserve, to raise interest rates in the near term, in a sharp shift from pre-war expectations of cutting or fixing U.S. interest rates for a long period.

U.S. interest rates

• After the rise in oil prices and according to the "FedWatch" tool of the CME Group: pricing of the probability of keeping U.S. interest rates unchanged at the April meeting declined from 99% to 96%, and pricing of the probability of raising interest rates by about 25 basis points rose from 1% to 4%.

• In order to re-price those probabilities, investors are closely following the release of more economic data from the United States.