The two-week ceasefire announced earlier this month triggered a sharp sell-off on
hopes of de-escalation, but the market stayed cautious as no LNG tankers were
confirmed transiting Hormuz and Iran continued to restrict traffic.
Prices crept back up through the second half of the week as the fragility of the
truce became clear, with carbon also adding support after EU ETS reform
proposals. The situation deteriorated sharply over the weekend as 21 hours of USIran peace talks in Islamabad collapsed, with Iran refusing to give up uranium
enrichment and demanding sovereignty over the Strait.
Trump responded by ordering a US naval blockade of the Strait of Hormuz
beginning Monday, with the Navy also instructed to interdict any vessel that has
paid Iran’s toll. Markets are highly volatile and a significant spike is likely on
Monday’s open as traders price in the blockade, the risk of fresh strikes on Iranian
energy infrastructure, and Iran’s threat to treat any military vessel approaching the
Strait as a ceasefire violation.