Oil prices have jumped and global equities have eased as markets grow increasingly concerned the ceasefire between the US and Iran might not hold, while tensions over the Strait of Hormuz escalate.
Brent crude futures rose about 6.0 per cent on Monday to $95.85 a barrel.
MSCI’s world share index was last down around 0.3 per cent, with Europe’s cross-regional STOXX 600 down 1.1 per cent, after Asia’s equity markets shrugged off risks to advance.
S&P 500 futures were 0.65 per cent lower.
Concerns grew on Monday that the ceasefire between the US and Iran might not hold after the US said it had seized an Iranian cargo ship that tried to run its blockade and Iran vowed to retaliate.
The US has maintained a blockade of Iranian ports, while Iran has lifted and then reimposed its own blockade on marine traffic passing through the Strait of Hormuz.
Kpler data, however, showed more than 20 vessels carrying oil products, metals, gas and fertiliser passed through the strait on Saturday, the busiest day for the choke point since March 1.
“Markets try to cling on to every bit of news that may point to one outcome or another, hence these large swings. But it is still a very uncertain and volatile situation,” Investec economist Sandra Horsfield said.
She noted that while markets have pulled back, moves made Friday – when Iran said it would open the Strait of Hormuz – had not been fully retraced, suggesting that at least some “improved sentiment still prevails”.
Outside the Middle East, British Prime Minister Keir Starmer is slated to address parliament on Monday, facing calls for his resignation over his handling of the appointment of Peter Mandelson as US ambassador even though he had failed a vetting process.
Meanwhile, the outlook for further negotiations between the US and Iran seemed uncertain.
“Whether this impasse proves to be merely a detour on the path to a resolution remains to be seen, but more volatility would seem the most likely outcome,” Derren Nathan, head of equity research at Hargreaves Lansdown, said in a note.
Iran rejected new peace talks with the US, its state news agency reported on Sunday, hours after US President Donald Trump said he was sending envoys for talks in Pakistan and would launch new strikes on Iran unless it accepts his terms.
“We always thought there would be some swings and roundabouts within that, rather than a straight linear path to the end outcome,” Investec’s Horsfield said.
Bonds, which rallied on Friday, retreated, and the yield on benchmark 10-year Treasuries rose 2.6 basis points to 4.2697 per cent, while the yield on German 10-year government bonds was last 3.6 bps higher at 3.0015 per cent.
The dollar – which was sold for the best part of the past two weeks – broadly steadied, trading at $1.1761 per euro.
Wall Street indexes touched record highs on Friday, supported by expectations of robust first-quarter earnings, the bulk of which come this week.
British inflation data, US retail sales and European Purchasing Managers’ Index figures are also due during the week, though much of markets’ focus will be on Gulf shipping.
“The critical barometer of geopolitical risk has been distilled into one data point: the number of ships transiting the Strait of Hormuz,” said Bob Savage, head of markets macro strategy at BNY.
“Peace talks matter, but the immediate focus is on oil and other supply shortages driving inflation.”
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