-- Oil prices surged early on Monday after Iran again closed the Strait of Hormuz after the United States refused to end a blockade of country's ports while firing on and seizing an Iranian cargo ship, lowering expectations the two countries will resume peace talks.
West Texas Intermediate crude oil for May delivery was last seen up US$4.63 to US$88.48 per barrel, while June Brent oil was up US$4.34 to US$94.72.
Prices plunged on Friday after Iran briefly reopened the Strait of Hormuz, the chokepoint for 20% of daily global oil demand supplied by Persian Gulf nations. However it later again refused to permit transit through the waterway as the United States declined to end its blockade of Iran's ports.
The United States is sending negotiators to Pakistan for peace talks but The Guardian reported Iran has no plans to attend after the U.S. disabled and seized a Iranian cargo ship in the Gulf on the weekend. A ceasefire between the two countries ends tomorrow, with U.S. President Trump again threatening to attack Iranian civilian infrastructure unless a deal is reached.
"Traders entered the weekend on the assumption that Iran had reopened the Strait of Hormuz, only for it to be effectively closed again within hours after the IRGC claimed a US blockade of Iran-linked vessels violated the ceasefire agreement set to expire on Tuesday. Prices extended gains after the US Navy fired upon and seized an Iranian vessel, further undermining confidence in any near-term diplomatic progress," Saxo Bank wrote.
The closure of the Strait has produced the largest-ever energy supply shock, pushing up physical oil prices along with gasoline and diesel costs and causing widespread shortages of aviation fuel.
"We have a divergence where the financial market is trading negotiations, improvements and resolution while at the same time the physical market is deteriorating day by day. Physical oil flows remain constrained by disrupted flows, longer voyage times and elevated freight and insurance costs," Bjarne Schieldrop, chief analyst Commodities, at SEB Research wrote.