Iran war escalation keeps Strait of Hormuz volatile

The Iran war has now dragged into its second month with no clear resolution in sight. Trump's public rejection of Iran's peace proposal on Truth Social has rattled markets hoping for a swift diplomatic exit. Despite one Qatar LNG tanker successfully transiting the Strait this week, shipping remains sporadic and dangerous, with analysts warning that few vessels are willing to risk the passage. Aramco reported Q1 profits jumped 26% thanks to higher crude prices and its East-West pipeline capacity bypass, yet the company cautioned that normalisation will take months, not weeks. Traders are acutely focused on whether the next round of talks yields progress; if tensions ratchet higher, energy shocks could force the Fed to abandon rate-cut expectations entirely, as Pimco's CIO warned to the FT this week. Panama Canal revenues are already up 15% as ships reroute around Africa. The longer the Strait remains constrained, the more permanent the market repricing becomes. Energy importers face crushing margin pressure while defence names and alternative trade routes benefit. Some traders are beginning to price in not just elevated oil, but sustained geopolitical risk premium that may persist into 2027.