Oil prices reach $105 as Iran and US tighten grip on Strait of Hormuz and peace talks show signs of collapse

Oil prices held above $105 a barrel on Friday as the Strait of Hormuz remained closed, with both the US and Iran seizing ships.

Brent crude climbed 0.63 per cent to $105.73 a barrel, and US West Texas Intermediate advanced 0.32 per cent to $96.17, as the naval standoff keeping the waterway shut showed no sign of resolution.

Asian equity markets were mixed 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. Nasdaq futures and S&P 500 futures advanced 0.6 per cent and 0.1 per cent respectively after closing lower in the cash session overnight, while European futures pointed to a softer open.

Israel and Lebanon agreed to extend their ceasefire for three weeks following a White House meeting on Thursday. “The Meeting went very well!” Donald Trump posted on social media.

The broader US-Iran ceasefire has also 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 continued to demand that vessels receive its permission to cross, while the US has intercepted several Iranian oil tankers and maintained its blockade of Iran’s ports since 13 April.

“The longer the strait remains closed, the greater the economic costs – raising the likelihood that one side will be forced to back down,” Commonwealth Bank of Australia wrote in a note on Friday, adding that it judged the US would be the first to concede given mounting political and economic pressure, though warning that the risk of major military escalation remained.

“The thing is, a ceasefire is a funny term to use in conjunction with a blockade and rolling tensions and animosities,” Vishnu Varathan, head of macro strategy for Asia-Pacific at Mizuho told Reuters. “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.”

Fatih Birol, head of the International Energy Agency, told CNBC on Thursday that the world was facing “the biggest energy security threat in history.”

Around 20 million barrels of oil and petroleum products were shipped through the strait daily before the war began.

“As of today, we’ve lost 13 million barrels per day of oil and there are major disruptions in vital commodities,” he said, urging governments to bolster their resilience with alternative energy sources. Currency markets were relatively calm. 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, with Japan’s finance minister renewing 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. Gold was flat at $4,691.60 an ounce.