Iran war disrupts Strait of Hormuz; energy prices spike

Traders are bracing for sustained energy disruption as the Iran war drags into its second month with no clear resolution in sight. The Strait of Hormuz, through which roughly one-third of seaborne crude passes, has seen near-zero tanker crossings on some days, forcing shipping to reroute around Africa at enormous cost. While a handful of tankers including Qatar's Al Kharaitiyat made cautious transits over the weekend following Pakistan-Iran talks, the passage remains sporadic and dangerous. Trump's rejection of Iran's response to a US peace proposal as "totally unacceptable" on Sunday signals the conflict could persist longer than some traders had anticipated, keeping risk premiums embedded in energy markets.

Commodity impacts are cascading across sectors. Oil prices have spiked as Aramco warned that even with its East-West pipeline at capacity, normalisation will take months. Saudi Aramco reported Q1 profit jumped 26% despite lower exports, cushioned by higher crude prices. LNG shipments from Qatar are moving but remain intermittent. Panama Canal revenues are up as much as 15% due to rerouting, a permanent reshaping of trade lanes. Energy importers face margin compression; defence contractors and oil majors benefit from elevated geopolitical risk premiums. A Pimco CIO warned the Federal Reserve may need to hike rather than cut rates if inflationThe rate at which prices rise across an economy. from energy shocks persists.

The stakes for risk-on momentumThe empirical fact that winners keep winning over the medium term. traders are acute. Markets have become numb to Iran war rhetoric but Trump's Sunday rejection shows the deal is fragile. More than 40 nations are meeting Monday to outline military contributions to a European-led Hormuz escort mission, but deployment takes time. Oil futures and LNG prices will likely remain volatile on each headline. A stable ceasefire would remove a major overhang; continued gridlock keeps energy and inflationThe rate at which prices rise across an economy. hedges in demand.