The Strait of Hormuz remains closed, with oil prices holding above $105 a barrel as both the United States and Iran continue to seize ships, ratcheting up economic pressure in an evolving standoff that has already removed millions of barrels a day from global markets.
Brent crude climbed 0.63 per cent to $105.73 a barrel on Friday, while US West Texas Intermediate advanced 0.32 per cent to $96.17. The naval confrontation that has effectively shut the world’s most critical oil transit chokepoint now enters a second week, with no sign of resolution. Before the conflict began, an average of 20 million barrels of oil and petroleum products passed through the strait daily, according to the International Energy Agency. That flow has been cut by about 13 million barrels a day, the IEA’s executive director Fatih Birol said on Thursday, warning that the world faces “the biggest energy security threat in history.”
Some analysts project that a sustained full closure could push crude prices to $120–150 a barrel within days and potentially to $180–200 a barrel, though the current de facto blockade has already slashed regional exports by roughly 10 million barrels a day. The IEA chief has urged governments to bolster resilience with alternative energy sources, noting that the crisis could trigger energy rationing and a global recession, with the UK economy expected to be more affected than other G7 nations.
Market reactions across Asia and beyond
Asian equity markets showed mixed performance despite the persistent energy pressure. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.3 per cent and was on track for a weekly gain of 0.8 per cent, while Japan’s Nikkei added 0.45 per cent. Stocks in South Korea, China and Hong Kong fell. Japan is particularly exposed to the strait’s disruption because of its low energy self-sufficiency and heavy reliance on oil transiting the waterway; China’s daily affected volume of imported crude stands at between 4.6 and 5.8 million barrels.
US equity futures pointed to a modest rebound after a lower cash session overnight, with Nasdaq futures and S&P 500 futures advancing 0.6 per cent and 0.1 per cent respectively. European futures, however, indicated a softer open. Rising oil prices are renewing concerns about inflation and the prospect of prolonged high interest rates, which tends to reduce the appeal of non-yielding assets such as gold – the precious metal was flat at $4,691.60 an ounce on Friday, though it was on track for a weekly decline as a stronger dollar also exerted pressure.
Duelling blockades: the battle for economic leverage
The broader US-Iran ceasefire has held, but the conflict has evolved into duelling naval blockades as both sides seek economic leverage to secure a deal on favourable terms. Iran seized two cargo ships in the strait on Wednesday and continues to demand that vessels receive its permission to cross, while the United States has intercepted several Iranian oil tankers and maintained its blockade of Iran’s ports since 13 April. The strait is effectively under a “double blockade,” with both navies preventing ships from entering or leaving.
President Trump has claimed the US has “total control over the Strait of Hormuz,” stating that no ship can enter or leave without US Navy approval. That assertion has been disputed: reports indicate Iranian boats are controlling traffic and bypassing US warships. The US military has conducted maritime interdictions in the Indian Ocean, boarding sanctioned vessels suspected of smuggling Iranian crude, and President Trump has ordered the military to “shoot and kill” small Iranian boats deploying mines in the strait. Iran’s Parliament Speaker has called the US blockade a violation of the ceasefire and a “hostage-taking of the world’s economy.” Tehran has stated it will not attend talks while the US maintains the blockade.
The economic stakes are enormous. Around 20 million barrels of oil and petroleum products were shipped through the strait daily before the war began. While Saudi Arabia and the UAE have limited overland pipeline capacity, countries such as Iran, Iraq, Kuwait and Qatar rely almost exclusively on the Strait of Hormuz for their energy exports. Alternative bypass pipelines exist but can offset less than 20 per cent of disrupted flows, according to the research briefing. Beyond crude oil, the crisis has disrupted natural gas supplies, fertilisers, petrochemicals, helium and sulfur, creating significant supply chain impacts.
“The longer the strait remains closed, the greater the economic costs – raising the likelihood that one side will be forced to back down,” analysts at Commonwealth Bank of Australia wrote in a note on Friday. They judged that the US would be the first to concede given mounting political and economic pressure, though they warned that the risk of major military escalation remained. Iran’s leverage over the strait, they added, is lifting prices across various industries, increasing the chance of sustained, longer-term inflation.
Vishnu Varathan, head of macro strategy for Asia-Pacific at Mizuho, was sceptical of any swift de-escalation. “The thing is, a ceasefire is a funny term to use in conjunction with a blockade and rolling tensions and animosities,” he said. “It’s not going to be a linear de-escalation. Investors have just been looking for excuses to put on optimistic trades opportunistically. I don’t think anybody in the market truly believes that this will be over in a week or two.”
Ceasefire extensions and diplomatic stalemate
On a separate track, Israel and Lebanon agreed on Thursday to extend their ceasefire for three weeks following a White House meeting. “The Meeting went very well!” President Trump posted on social media, adding that the US would work with Lebanon to help it protect itself from Hezbollah. The initial 10-day ceasefire had been due to expire on Monday. Peace negotiations between Washington and Tehran, however, have shown little progress, with each side seeking economic leverage for a broader settlement.
Currency markets brace for central bank decisions
Currency markets remained relatively calm despite the geopolitical backdrop. The euro fell to $1.1684 and was set to lose nearly 0.7 per cent for the week, while sterling held at $1.3469. The Japanese yen edged to 159.78 per dollar, just below the 160 level widely seen as a potential trigger for intervention. Japan’s finance minister renewed warnings of decisive action in close coordination with Washington.
Central bank decisions from the Federal Reserve, the European Central Bank and the Bank of England are all due next week, with investors watching for guidance on how policymakers plan to respond to war-driven inflation. The IEA chief has warned that the crisis could boost nuclear power, renewables and electric vehicles, though it may also lead to a resurgence of coal in some Asian countries. For now, the global economy remains caught between a closed strait and a still-open diplomatic window that few believe will close soon.
