The failure of negotiations at the weekend has raised concerns that the global energy crisis will deepen.
Crude oil prices jumped sharply on Monday, rising more than 8% above $100 per barrel after US–Iran peace talks failed to produce any progress and US President Donald Trump announced plans for a naval blockade of Iranian ports.
At the start of trading, West Texas Intermediate (WTI) for May delivery climbed about 8% to $104.50 per barrel, while Brent crude for June delivery increased 7% to $102.
In Asian markets, South Korea’s Kospi index initially dropped 2% before recovering slightly, while Japan’s Nikkei fell 0.3%.
Oil prices had declined and stocks rallied the previous week after Trump agreed to a two-week ceasefire mediated by Pakistan. However, the situation remained fragile as Israel continued strikes in Lebanon and the Strait of Hormuz stayed effectively shut.
The US dollar strengthened broadly in early Asian trading, reaching its highest level in a week. The dollar index, which tracks the currency against six major peers, rose up to 0.5% to 99.187, its highest since April 7.
Meanwhile, the euro slipped 0.5% to $1.1667, the British pound fell 0.6% to $1.3383, the Australian dollar dropped 0.8% to $0.7014, and the New Zealand dollar declined 0.7% to $0.5798.
Trump stated on Sunday that the US Navy would begin blockading the Strait of Hormuz after extended negotiations with Iran failed to end the conflict, putting the already fragile ceasefire at risk.
US Central Command confirmed that the blockade of all maritime traffic entering and leaving Iranian ports would begin at 10am ET (7pm Pakistan time) on Monday.
Analysts at Westpac noted that early and thin foreign exchange trading reflected a risk-off sentiment, with the US dollar gaining broadly in response.
