Oil prices climbed sharply above $100 a barrel on Monday after the United States military launched a naval blockade of Iranian ports and coastal areas, following the collapse of weekend peace talks and deepening fears over global energy supply.
Brent crude, the global benchmark, rose 7 percent to $102 a barrel, representing a gain of around 40 percent since the start of the war. West Texas Intermediate (WTI), the US benchmark, climbed 7.8 percent to $104 a barrel, more than 50 percent above pre-war levels.
The United States Central Command (CENTCOM) said naval forces would begin a blockade of all maritime traffic entering and exiting Iranian ports from Monday at 10 a.m. Eastern Time, while clarifying that it would not impede freedom of navigation for vessels transiting the Strait of Hormuz to and from non-Iranian ports.
The blockade follows the breakdown of negotiations between Washington and Tehran over the weekend in Islamabad. Vice President JD Vance, who led the US delegation, said talks failed because Iran would not provide an affirmative commitment that it would not seek a nuclear weapon.
Although the two-week ceasefire between the US and Iran officially remains in place until April 22, traffic through the strait had already collapsed, with only 17 vessels crossing on Saturday according to maritime intelligence firm Windward, down from roughly 130 daily transits before the war began.
Iran responded sharply to the blockade announcement. Iran’s armed forces accused the US of piracy, declaring that the country’s ports are “either for everyone or for no one.” Iran’s parliamentary speaker, Mohammad Bagher Ghalibaf, warned that Americans would soon be nostalgic for four-dollar petrol.
Analysts warned that the blockade risks extending well beyond Iranian ports in practical terms. Anas Alhajji, former chief economist at NGP Energy Capital Management, said non-Iranian ships would likely continue avoiding the strait regardless of US assurances, due to elevated insurance premiums and fear of Iranian retaliation, effectively making it a full blockade of the waterway.
US Energy Secretary Chris Wright told attendees at the Semafor World Economy conference on Monday that energy prices would remain high and possibly rise further until meaningful ship traffic moves through the strait, which he anticipated could occur within the next few weeks.
The International Energy Agency, the World Bank, and the International Monetary Fund issued a joint warning that there would be no quick relief for high fuel and fertiliser prices, even if the Strait of Hormuz were to reopen, noting that supply chains would take time to normalise and that prices could remain elevated for a prolonged period.
Analysts also warned that if the blockade triggered retaliation from Yemen’s Houthi forces, who could shut down the Bab al-Mandeb strait, oil could surge above $150 a barrel, eliminating the main alternative export route for Gulf oil and gas.
The Organisation of the Petroleum Exporting Countries (OPEC) has already downgraded its forecast for global oil demand in the second quarter by 500,000 barrels per day, citing the effects of the ongoing conflict.
