Oil price fluctuates ahead of Trump's Iran deal deadline

Oil price swings as Trump's Iran deal deadline passes

Oil prices swung sharply on Tuesday as a deadline set by US President Donald Trump for Iran to reopen the Strait of Hormuz passed without agreement. Benchmark Brent crude rose above $111 a barrel in early trade, fell back below $108, then climbed again to around $110, reflecting deep uncertainty about whether a deal would materialise before Trump's 20:00 Washington DC time cut-off.

Trump on Monday threatened to destroy Iran "in one night" if it refused to reach an agreement with the US. Speaking at the White House on Tuesday, he said he believed "reasonable" leaders in Tehran were negotiating in good faith, but acknowledged the outcome remained uncertain.

US stock markets opened lower on Tuesday morning. The Dow Jones Industrial Average and the S&P 500 each fell around 0.5%, whilst the Nasdaq dropped 0.7%, as investors weighed the prospect of a prolonged conflict.

Iran rejects ceasefire proposals

Tehran has rejected proposals for a temporary ceasefire, insisting on a permanent end to the US-Israel war with Iran and the removal of all sanctions before it will negotiate. Oil and gas shipments through the Strait of Hormuz have been severely disrupted since 28 February, when Iran began threatening to attack vessels using the route in retaliation for US and Israeli airstrikes.

Ye Lin, an analyst at research firm Rystad Energy, said the initial rise in oil prices on Tuesday suggested investors had concluded a deal was harder to reach than hoped, given Iran's hardline position and the risk of a prolonged conflict. Lin added that traders were also trying to assess whether Trump genuinely wanted a diplomatic outcome or was using talks as cover for a larger military operation.

Supply chains and shipping costs weigh on markets

Tineke Frikkee, senior fund manager at W1M, said that even a rapid agreement would not produce an immediate economic benefit. Oil flows through the Strait of Hormuz could resume relatively quickly if a deal were struck, she said, but liquid natural gas presented a far longer recovery timeline.

"Facilities have been turned off, so it will take three to four months to get them back online," Frikkee said. She noted that the cost of insuring vessels through the strait had risen sharply during the conflict, meaning that even ships with permission to pass were doing so at significantly elevated cost. "It kind of goes to the highest bidder," she said, warning that supply availability did not guarantee affordability.

Ahead of Tuesday's deadline, several Asian countries struck bilateral agreements with Iran to allow their vessels through the strait. Japan and South Korea, both heavily reliant on energy imports from the Gulf, have been among the economies most affected by the disruption. Shipping volumes through the waterway remain well below pre-conflict levels despite those arrangements.

Asian economies bear the brunt

Around a fifth of the world's oil and gas shipments ordinarily transit the Strait of Hormuz. The volume restrictions have driven up energy prices across major importing nations and raised concern among economists about a sustained rise in inflation in markets that depend on Gulf supply chains.

Trump has urged countries to contribute warships to the region to help escort more vessels safely through the waterway. On Tuesday, the UK announced it would host a meeting of allied military planners and partners to discuss measures to secure the strait once the conflict ends.

Rate rise warnings add pressure on central banks

Jamie Dimon, chief executive of JPMorgan, warned on Tuesday that global interest rates could rise as the conflict drives up energy prices and feeds through to broader inflation. The warning carries weight at a moment when central banks in the US, UK, and eurozone are already under pressure to balance slowing growth against persistent price rises.

A sustained period of elevated oil prices would complicate that task considerably. Energy costs affect transport, manufacturing, and food production across most sectors of the global economy, meaning that a prolonged blockage of the Strait of Hormuz would not remain a commodity story for long.

Industry impact: a supply shock with no quick exit

The Strait of Hormuz sits at the centre of the global energy supply chain, and the current disruption is exposing how little redundancy exists in the system. Even if talks produce an agreement this week, the economic damage will outlast the ceasefire. Shipping insurers have already repriced the route, LNG facilities will take months to return to capacity, and Asian importers that secured bilateral passage deals have done so on terms that reflect a seller's market.

For businesses and governments dependent on stable energy costs, the more significant risk may not be the oil price itself but the inflation feedback loop Dimon describes. Central banks that had expected to hold or cut rates in the second half of 2026 may find that the conflict has reset those expectations entirely. The longer the strait remains restricted, the harder it becomes for policymakers to engineer a soft landing.