The refining sector and traders worldwide are currently in a frantic race to secure available crude oil shipments due to an actual supply shortage. President Donald Trump stated to reporters that this measure would be highly effective, after having previously threatened to retaliate if Tehran resisted. The White House expressed concern over Tehran tightening its grip on the strait, imposing tariffs on some ships, and keeping navigation at a low level compared to pre-war levels. According to preliminary estimates compiled by Bloomberg, Iran was still exporting crude oil and condensates from the Arabian Gulf in March, with China being the primary destination, albeit with decreased flows compared to the previous month. Mona Yacoubian, director of the Middle East program at the Center for Strategic and International Studies, commented on the US blockade plan, saying: "It's hard to understand... It seems to me a very ambitious endeavor that doesn't solve the problem of disrupting navigation." She added that if Iran feels its oil exports are threatened, it could push the Houthi forces in Yemen to target the Bab-el-Mandeb strait, the southern entrance to the Red Sea. She also asked: "With some oil-laden ships heading to China, will the US Navy blockade them, thus leading to a crisis in US-China relations?". The Strait of Hormuz, which connects the Arabian Gulf to global markets, has been effectively closed since the start of US and Israeli strikes on Iran in late February. Riyadh announced on Sunday that it had restored full production capacity via the East-West pipeline, in addition to resuming production from the Manifa field after Iranian strikes. Harris Khorshid, chief investment officer at Carobar Capital LP in Chicago, said: "The market has rushed its expectations on de-escalation", adding that the US blockade threatens to slow shipping, delay cargo arrivals, and increase insurance costs. The Houthis entered the war in late March and have the ability to disrupt navigation. The importance of oil flows through the Red Sea has increased since the outbreak of the war, as Saudi Arabia has boosted oil flows via pipelines across the country to the Yanbu port. US Vice President JD Vance stated that Washington's primary goal is Iran's commitment not to seek nuclear weapons, but they returned to the country without it. Speaking to reporters at Andrews Joint Base, President Trump said: "I don't care if they come back or not", when asked how long he would wait for Iran to return to the negotiating table. Sol Kavonic, head of energy research at MST Markit, said: "The market has now largely returned to the conditions that existed before the ceasefire, except that the US will now prevent the remaining Iranian flows of two million barrels per day through Hormuz, which effectively tightens the market and affects prices". OPEC, which had previously warned that damage to energy assets in the Middle East would negatively impact supplies for a long time even after the war ends, is set to release its monthly market report later on Monday, which could provide a new perspective on the extent of the disruption. Collapse of talks The collapse of US-Iranian talks is a major setback after reaching a fragile ceasefire agreement last week. The Wall Street Journal reported that the US president and his advisors are considering, in addition to the blockade, resuming limited strikes. On Sunday, Trump announced that the US Navy would begin controlling the Strait of Hormuz, escalating tensions after the failure of lengthy talks with Iran aimed at reaching an agreement to end the war, putting the fragile two-week ceasefire at risk. He added that oil and gasoline prices may remain high until the midterm elections in November, a rare acknowledgment of the potential political fallout from his decision to attack Iran six weeks ago. Shipping US Central Command stated in a statement on X that the blockade "will be applied neutrally to ships of all countries entering or leaving Iranian ports and coastal areas, including all Iranian ports on the Arabian Gulf and Gulf of Oman". The statement also said that US forces will not interfere with the freedom of navigation for transiting ships through the Strait of Hormuz to and from non-Iranian ports. Tony Sicamore, market analyst at IG, said this measure would effectively choke off Iranian oil flows, forcing Tehran's allies and clients to exert the necessary pressure to reopen the waterway. The Islamic Revolutionary Guard Corps of Iran said on Sunday that "any military ships attempting to approach the Strait of Hormuz will be considered a violation of the two-week US ceasefire and will be dealt with firmly and decisively". Additional risks Michael Ratney, former US ambassador to Saudi Arabia, told Bloomberg TV: "This measure adds a huge additional risk element". Tehran described US demands as "excessive", according to the semi-official Tasnim news agency. Oil climbs to $104 per barrel.. European gas futures jump 18% Financial and oil markets have been in turmoil since the outbreak of the Middle East war on February 28 and the closure of the Strait of Hormuz, through which 20% of global oil and gas passes. On Sunday, US President Donald Trump announced that the US Navy would begin controlling the Strait of Hormuz, which Iran has effectively closed since the start of the war in late February. Oil and natural gas prices rose as the US moved to impose a blockade on Iranian ports after weekend talks between Washington and Tehran to reach an agreement failed, exacerbating the global energy crisis that has rocked markets. Oil prices rose more than 8% to $104 per barrel on Monday morning, while European gas futures jumped by nearly 18%. US Central Command announced that US forces will begin implementing the blockade, which includes all ships entering or leaving Iranian ports, starting at 10 AM New York time on Monday. The war in the Middle East has caused disruption in global energy markets, with high prices threatening to stoke inflation and slow economic growth.
