The US will head to Pakistan on Monday to try and secure a peace deal, but Iran has hit out fiercely against Donald Trump’s latest move.
Global oil prices rose overnight after President Donald Trump said the US has intercepted and seized an Iran-flagged cargo ship.
Brent crude futures were up by 4.74% at $94.66 (£70.11) a barrel as of 5:30am, which was a drop from the 7% high seen earlier in the night.
“Oil markets continue to gyrate in response to oscillating social media posts by the US and Iran, rather than the realities on the ground which remain challenging for oil flows to resume in a rapid fashion”, analyst Saul Kavonic from financial services firm MST Marquee told the BBC.
“This is all part of negotiations, physically playing out in real time on the Strait of Hormuz.”
It comes as the fragile ceasefire between the US and Iran is on the verge of collapse following a direct naval confrontation in the Gulf of Oman.
President Donald Trump announced on Sunday that the US Navy successfully intercepted and seized the Iranian-flagged cargo ship Touska after it allegedly attempted to breach an American naval blockade.
While the US is dispatching a delegation led by Vice President JD Vance to Islamabad, Pakistan, for a second round of peace negotiations, Iranian state media has rejected the invitation.
Tehran has condemned the seizure of its vessel as an “armed robbery” and a violation of the existing truce, vowing to keep the Strait of Hormuz closed until the U.S. lifts its maritime siege.
The ceasefire is due to expire this Wednesday – and Tehram and Washington still seem miles away from a peace deal.
It comes just days after the situation appeared to be on the mend.
Oil prices plunged more than 10 per cent on Friday after Iran declared the Strait of Hormuz would be “completely open”.
Brent oil opened around $US98 ($AUS 136), falling to $86.52 a barrel by 10:50am EDT, less than two hours after the announcement was made by Iran’s Foreign Minister Abbas Araghchi on X.
Meanwhile, Mr Trump’s former head of counterterrorism has publicly urged him to “get out” of the war immediately, even if it’s messy, and “avoid the sunken cost trap”.
“POTUS is laying out two courses of action: a negotiated settlement, or a major escalation,” said Joe Kent, who left that role in March.
“There is a third option, and he should take it. Recognise there is no way to force a positive outcome, and simply leave.
“Don’t double down on failure. Avoid the sunken cost trap, leave now, and put America’s interests first.”
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