Oil rallies 5% on fears of US-Iran truce collapse

Oil prices surged by approximately 5% during Monday's trading amid fears of a collapse in the U.S.-Iran ceasefire after Washington seized an Iranian cargo ship, while navigation through the Strait of Hormuz remained nearly halted.

Brent crude contracts rose by $4.37, or 4.8%, to reach $94.75 per barrel by 11:48 GMT, while U.S. West Texas Intermediate (WTI) climbed by $4.76, or 5.7%, to $88.61 per barrel.

Both contracts had declined by 9% on Friday—their largest daily drop since April 18—after Iran announced that passage for all commercial vessels through the Strait of Hormuz was open for the remainder of the ceasefire.

At the same time, U.S. President Donald Trump stated that Iran had agreed not to close the Strait again, a waterway through which approximately one-fifth of global oil supplies flowed before the war broke out nearly two months ago.

Jun Guo, an analyst at Sparta Commodities, said: "Within just 24 hours of the 'full opening' announcement on Friday, there were already tankers coming under fire from the Iranian Revolutionary Guard."

She added: "Market fundamentals are deteriorating, as between 10 to 11 million barrels per day of crude oil remain out of supply," referring to production losses.

The United States stated on Sunday that it had seized an Iranian cargo ship that attempted to break the blockade, while Iran announced it would retaliate, increasing fears of a resumption of hostilities.

Tehran also announced it would not participate in a second round of negotiations that the United States had hoped to launch before the expiration of the two-week ceasefire this week.

Bjarne Schieldrop, an analyst at SEB Research, said: "Financial markets are trading on the basis of negotiation, improvement, and resolution, while at the same time the physical market is deteriorating day by day."

He added: "Physical oil flows remain restricted due to supply disruption, longer voyage times, and high shipping and insurance costs."

Shipping data showed that maritime traffic through the Strait of Hormuz remained nearly at a standstill on Monday, with only three transits recorded during the past 12 hours.

More than 20 vessels had crossed the Strait on Saturday, carrying oil, liquefied petroleum gas (LPG), metals, and fertilizers, according to Kpler data—the highest number of vessels to cross the passage since March 1.

In another context, China is reducing refined fuel exports rather than banning them, as countries like Malaysia and Australia continue to receive supplies, even after Beijing extended the restrictions imposed last month into April, according to shipping data and traders.