Oil prices have fallen back after briefly rising to above $100 a barrel as Donald Trump claimed Iran had made contact and wanted “very badly” to strike a deal in the face of his blockade of the strait of Hormuz.
The Brent crude international benchmark rose above the key psychological threshold earlier in the day, at one point up 6.9% to $101.70 a barrel on news of the US president’s plan to block the waterway to Iranian marine traffic.
However, it later eased back to a little over $99 a barrel after Trump said the blockade had come into force at 10am ET (3pm BST) and the Iranians had subsequently got in touch.
Speaking outside the White House, he said: “I can tell you we’ve been called by the other side. They’d like to make a deal very badly … We’ve been called this morning by the right people, the appropriate people.
It came after he posted on his Truth Social platform that Iranian attack ships coming near the blockade would be “eliminated”.
Gas prices increased on Monday, with the British wholesale gas contract for May jumping by almost 12% earlier in the day before later easing to settle more than 5% up at 114.8p per therm.
Analysts at JPMorgan Chase said last week they expected oil prices to stay high in the second quarter, above $100 a barrel, before easing in the second half of the year.
Meanwhile, Trump’s energy secretary, Chris Wright, said on Monday that oil prices were likely to hit their peak in the coming weeks after ship traffic resumed through the strait of Hormuz.
Most Asian stock markets fell on Monday, with Japan’s Nikkei down 0.7% and Hong Kong’s Hang Seng index losing 1%, while Chinese stocks rose slightly. Sentiment was helped by Beijing’s announcement of a 10-initiative strategy aimed at deepening ties with Taiwan.
European stocks also declined slightly. The FTSE 100 index in London lost 0.2%, Germany’s Dax and France’s Cac 40 both lost 0.3% and Spain’s Ibex fell 1%.
With large numbers of oil tankers remaining stuck in the Gulf, the ceasefire had raised hopes that ships could get moving again. But Trump announced a blockade of the strait on his Truth Social platform on Sunday after peace talks between Washington and Tehran held in the Pakistani capital ended after 21 hours without a deal.
Russ Mould, investment director at the broker AJ Bell, said: “Investors are trying to gauge whether a fragile ceasefire will hold, and they are waiting to see the next moves from Tehran and Washington. Against this backdrop, oil above $100 per barrel is no surprise and the longer it persists at this level, the greater the scars for the global economy.
“The stagflation word is being widely aired once again as geopolitical turmoil threatens to stymie international growth and stoke inflationary pressures.”
Priyanka Sachdeva, a senior market analyst at the broker Phillip Nova, said: “In today’s environment, every barrel of risk added to oil markets carries an inflation price tag for the global economy.”
Interest rate expectations have shifted again; investors now see an 84% chance of two rate increases from the Bank of England this year to tackle rising inflation, up from 60% on Friday. Before the Iran war, the central bank was expected to cut rates.
The price of gold fell 0.5% to $4,723 an ounce as the blockade fuelled inflation concerns, prompting traders to scale back expectations for Federal Reserve rate cuts this year.
Michael Brown, a senior research strategist at the broker Pepperstone, said: “While crude has advanced, and stocks slipped a touch, the overall market reaction to the weekend news of a US navy blockade of the strait of Hormuz has been relatively contained, as participants view the move largely as a negotiating gambit from president Trump.”
More than 32 million people worldwide could be plunged into poverty by the economic fallout from the Iran war, with developing countries expected to be hit hardest, according to a report released by the UN Development Programme on Monday.
