A significant escalation in US-Iran tensions has triggered sharp moves across global markets after the failure of 21-hour-long peace talks in Islamabad over the weekend. US President Donald Trump announced that Washington would begin blockading all ships entering or leaving the Strait of Hormuz, with US Central Command (CENTCOM) confirming that forces will start blockading all maritime traffic entering and exiting Iranian ports at 10 AM ET (14:00 GMT) on Monday [1][3][4]. The Wall Street Journal reported that President Trump and his advisers are also considering resuming limited military strikes in Iran to break the standoff in peace talks [4].
The immediate market reaction saw West Texas Intermediate (WTI) oil prices open the week with a bullish gap, climbing roughly 8% and trading around $98.00 per barrel, with the black gold aiming for a retest of the $100 mark [1][2][4]. The surge in oil prices is attributed to the re-escalation of the US-Iran conflict and the potential threat to the ceasefire agreement [1][2][4].
The spike in energy prices has fueled inflation risks, reducing expectations for rate cuts by the US Federal Reserve and other major central banks [1]. Friday’s US Consumer Price Index (CPI) data showed annual CPI rising to 3.3% in March from 2.4% in February, with a monthly increase of 0.9% after 0.3% previously. Core CPI rose 0.2% month-over-month and 2.6% year-over-year [1]. This reinforced the Fed’s higher-for-longer stance on interest rates [1].
Currency markets reflected heightened risk aversion. The US Dollar strengthened as a safe-haven, with the Canadian Dollar (CAD) weakening further against the Greenback, despite the oil rally. USD/CAD capitalized on renewed demand for the US Dollar, with CAD the weakest against USD among major currencies, showing a 0.70% decline [2]. The Pound Sterling (GBP) also declined against the US Dollar, halting a five-day winning streak and trading around 1.3390, as risk-off sentiment prevailed [3].
Iran’s Parliament Speaker Mohammad Bagher Ghalibaf stated that the US failed to gain Tehran’s trust despite 'constructive initiatives,' and the Revolutionary Guard (IRGC) warned that any military vessels approaching the Strait of Hormuz would violate the ceasefire and face a decisive response [3]. Looking ahead, market participants are focused on further details of the US blockade and its implications for the fragile US-Iran ceasefire [4].
CONCLUSION
The US decision to blockade the Strait of Hormuz following failed peace talks with Iran has sent oil prices surging and triggered broad risk-off moves in global markets. The resulting inflation concerns have dampened expectations for central bank rate cuts, while safe-haven demand has boosted the US Dollar at the expense of risk-sensitive currencies. Market attention remains on the evolving situation in the Middle East and its potential to further disrupt energy markets and global risk sentiment.