The energy markets are once again on edge given the threat issued by President Trump regarding the blockade of Strait of Hormuz and other Iranian ports.
The announcement comes after the US and Iran failed to reach an agreement in diplomatic talks held in Islamabad from Saturday to early Sunday.
Trump said in a Truth Social post on Sunday that the US will start “BLOCKADING any and all Ships trying to enter, or leave, the Strait of Hormuz”.
US Central Command later said the blockade of traffic entering and exiting Iranian ports will begin at 10:00 ET (14:00 GMT) on Monday.
As a result of the gloomy geopolitical scenario, oil prices rose above $100 a barrel as energy markets reopened in Asia on Monday.
Global benchmark Brent crude reached $102.30, up by 7.3 percent and West Texas Intermediate at $104.94, which was 8.7 percent higher.
Last Wednesday, the energy markets witnessed a wave of respite as oil plunged below $100 after the US and Iran agreed to a conditional ceasefire deal under a two-week framework followed by reopening of Strait of Hormuz.
However, the recent failure of negotiations has not only raised stakes in this geopolitical conflict but also put the energy market on tenterhooks, worrying about the imminent energy crisis.
Since February, the Strait of Hormuz has emerged as a key flashpoint in the US-Iran conflict, known for shipping 20 percent of the world’s oil. After the persistent closure of the Strait announced by Iran, several shipments carrying oil have been at standstill.
According to economist Chua Yeow Hwee from Singapore’s Nanyang Technological University, “Oil prices are likely to remain elevated because expectations now depend on whether the blockade is fully implemented, whether shipping disruptions spread, and whether diplomacy resumes.”
Stock markets tumble
Major stock indexes in Asia tumbled on Monday. For instance, Nikkei 225 in Japan plunged by 0.7 percent and South Korea’s Kospi dropped by 1 percent.
The US stock futures also signal a bearish opening for Wall Street shares. India’s Nifty 50 was the worst-performing major Asian index, declining nearly 2 percent.
The month-ahead US gas contract is up 9% to 119.50 a therm, its highest level since last Tuesday.
In Australia, the stocks were 0.53 percent lower and China’s CSI300 index dropped 0.2 percent. Hong Kong’s Hang Seng index extended early losses and was 1.22 percent lower.
Asia markets have been bearing the brunt of the escalating conflict due to heavy dependence on the oil coming from the Middle East.
