MARKET NEWS

(Bloomberg) -- Oil rose on signs of heightened tensions in the Strait of Hormuz after President Donald Trump said the US would guide stranded ships out of the vital waterway.

Brent spiked more than 5% to trade above $114 a barrel, before paring some of the gain as prices fluctuated sharply. Futures reached intra-day highs following unverified Iranian media reports claiming two missiles hit an American patrol boat, which the US Central Command denied.

Trump’s plan left shipping executives perplexed, while Iran said US forces would be attacked if they entered the Strait of Hormuz. Iran’s semi-official news agency later said Tehran “redefined the control zone” in the strait, effectively setting out a wider area to regulate shipping in the region.

The escalation comes after weeks of stalemate and failed attempts to reach a peace deal, with Tehran keeping a tight grip over Hormuz and the US enforcing a blockade of Iran’s ports to choke its oil exports. The deadlock threatens to prolong the oil market’s worst-ever supply disruption, as traffic remains at a near standstill and attacks on commercial vessels continue.

“The market is clearly nervous that the events today further weaken the prospect of a reopening of the strait,” said Jens Naervig Pedersen, a strategist at Danske Bank AS.

Hormuz was the chokepoint for about a fifth of the world’s oil shipments before the war erupted with US-Israeli attacks on Iran at the end of February. Its closure has sent energy prices surging, triggered fuel shortages in several parts of the world and is stoking fears of higher inflation and slower global growth. Soaring fuel prices are also a political headwind for Trump.

US Central Command said Sunday it would provide military support, including guided-missile destroyers, aircraft and drones to ships transiting the strait. Two US-flagged merchant vessels successfully transited the strait, US Central Command said in a post on Monday.

Several shipowners and a ship manager contacted by Bloomberg said more concrete details would be needed, as well as assurances around key concerns including mines and safety from Iranian attacks. They asked not to be named given the sensitivity of the issue.

The UAE said one of its vessels was targeted by two Iranian drones as it was passing Hormuz. On Sunday, there was a report of a bulk carrier being attacked by small boats.

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