Oil prices jumped sharply, the US dollar rebounded and global markets turned cautious on Monday as renewed Iran tensions disrupted shipping through the Strait of Hormuz, a key artery for global energy flows, just days before a ceasefire deadline.
Brent crude rose about 6 percent to around $96 a barrel in early Asian trade, while the dollar index climbed to a one-week high as investors moved toward safer assets. S&P 500 futures fell about 0.7 percent, and Asian markets were mixed, reflecting a measured but clear shift in risk sentiment.
The moves followed fresh geopolitical developments over the weekend, after the United States seized an Iranian cargo ship, prompting Tehran’s military command to warn of retaliation and reject further peace talks.
Hormuz shipping disruption becomes key market signal
Shipping through the Strait of Hormuz has slowed sharply amid the standoff, with Iran re-imposing a de facto closure of the route.
Data from Kpler showed more than 20 vessels carrying oil, gas, metals and fertiliser transited the strait on Saturday, the highest since March 1, even as overall flows remained constrained.
“The critical barometer of geopolitical risk has been distilled into one data point: the number of ships transiting the Strait of Hormuz,” Bob Savage, head of markets macro strategy at BNY, said.
Markets react, but not pricing full escalation
Despite the rise in oil and safe-haven demand, analysts said markets were not yet positioning for a prolonged disruption.
“The headlines look bad; it looks like there’s disagreement … which has led to a little bit of re-escalation,” Damien Boey, portfolio strategist at Wilson Asset Management, said.
“But I think, ultimately, both sides want to be able to do a deal,” he added.
Paul Chew, head of research at Phillip Securities, said in a note that his base case remains a resolution to the conflict.
Dollar rebounds, bonds reverse Friday gains
The dollar index rose as much as 0.3 percent to 98.485, reversing losses seen when the strait briefly reopened on Friday.
The euro slipped to around $1.1731, while the yen weakened to about 159 per dollar. The Australian and New Zealand dollars also declined.
Bond markets retraced part of their recent rally, with the 10-year US Treasury yield rising about 3.2 basis points to 4.276 percent after falling sharply in the previous session.
Ceasefire uncertainty drives next moves
The latest tensions come just ahead of a ceasefire linked to the Iran conflict that is due to run until Tuesday.
US President Donald Trump said the US military had seized an Iranian cargo vessel that attempted to bypass a naval blockade. Iran later said it would not participate in a second round of peace talks and warned of retaliation.
Trump had also said US envoys would travel to Pakistan for talks and warned of further strikes if Iran did not accept US terms.
Analysts at Westpac said recent developments could temper optimism around a near-term resolution, while Barclays said investor positioning still favoured the dollar.
What markets are watching next
Investors are tracking Gulf shipping flows as a real-time signal of supply disruption, alongside a heavy week of global economic data including US retail sales, UK inflation and European PMI readings.
Wall Street indexes had closed at record highs on Friday, supported by expectations of strong corporate earnings, leaving markets sensitive to any geopolitical developments that could affect inflation and growth expectations.
