Oil prices rose on Monday after US President Donald Trump warned Iran that “the clock is ticking,” as talks to end the conflict appeared to have stalled. The global benchmark Brent crude briefly reached $112 (£83.62) a barrel before falling back to around $110. Government borrowing costs in the US, Japan, and Europe remained a key focus amid growing inflation fears.
Energy markets have experienced significant volatility after Iran effectively closed the crucial Strait of Hormuz waterway in retaliation for US and Israeli strikes on the country, which began on February 28. Approximately one-fifth of the world’s oil and liquefied natural gas (LNG) typically transits through this narrow shipping route. The oil market has been quick to react to any indications of progress, or lack thereof, towards a peace agreement that would lead to the reopening of the strait.
The surge in crude prices during early Monday trading followed Trump’s social media post stating that Iran “had better get moving, FAST, or there won’t be anything left of them,” adding, “TIME IS OF THE ESSENCE!” Last week, the president warned that the ceasefire was on “massive life support” after rejecting Iran’s demands, calling them “totally unacceptable.” According to the news platform Axios, Trump is expected to hold a meeting on Tuesday with his top national security advisers to discuss options for military action concerning Iran.
However, oil prices later retreated following reports from an Iranian news agency claiming that the US had accepted a temporary waiver on sanctions targeting Iran’s crude oil during negotiations, which raised hopes for progress in peace talks. The increase in energy costs since the conflict began has also driven up government borrowing costs, as reflected in bond yields. The concern is that higher energy bills will fuel inflation, prompting central banks to raise interest rates.
On Monday, the benchmark 10-year US Treasury yield—effectively the interest rate charged to the US government for a 10-year loan—briefly reached 4.63%, its highest level in over a year, before declining. Yields on Japanese bonds also surged after Reuters reported that the government was likely to issue new debt as part of the funding for a planned extra budget, aimed at cushioning the economic impact of the war. The yield on the 30-year Japanese government bond climbed to a record high of 4.2%, while the 10-year yield jumped to 2.8%, its highest since October 1996. Yields on eurozone bonds also opened higher before falling back as oil prices decreased. These latest market movements occurred as G7 finance ministers convened in Paris. European Central Bank head Christine Lagarde, when asked upon her arrival if she was concerned by a sell-off in global bond markets, responded to reporters: “I always worry, that’s my job.”
‘Summer of Pain’
Claudio Galimberti, chief economist at Rystad Energy, told the BBC that the high level of oil prices represented “a very dire situation and it’s going to get worse unless the strait is opened.” He added, “We are approaching a summer of pain, I am afraid, unless Hormuz is opened.” Elevated oil prices have driven up fuel costs for businesses, including airlines, many of which are entering the peak holiday season.
Irish airline Ryanair reported its full-year results on Monday, stating: “The conflict in the Middle East has created economic uncertainty, and we still don’t know when the Strait of Hormuz will reopen.” The carrier stated it had secured contracts to fix the price for 80% of its jet fuel in the coming months. However, it noted that the price of the remaining 20% “has spiked due to the Middle East conflict.” Ryanair’s profits rose to €2.26 billion (£2 billion) from €1.6 billion last year, with sales up 11% to €15.5 billion for the year ending March. But it added that the business outlook was currently difficult to predict due to the Iran conflict as well as the ongoing war in Ukraine.
The Strait of Hormuz is a narrow body of water situated between Iran, the United Arab Emirates (UAE), and Oman. This waterway—approximately 21 miles (33 km) at its narrowest point—connects the Persian Gulf to the Gulf of Oman, making it a vital global shipping route. About 20% of the world’s oil and liquefied natural gas typically passes through the Strait of Hormuz. This oil originates not only from Iran but also from Gulf states such as Iraq, Kuwait, Qatar, Saudi Arabia, and the UAE. In 2025, approximately 20 million barrels of oil passed through the waterway daily, according to estimates from the US Energy Information Administration (EIA)—representing nearly $600 billion (£447 billion) worth of energy trade annually. Sea traffic has been significantly reduced since the conflict began.
During the Middle East conflict, Iran has launched attacks on neighboring countries including Israel, Bahrain, and the United Arab Emirates (UAE). On Sunday, the UAE reported that a drone strike had caused a fire near its nuclear power station, labeling the incident a “dangerous escalation.” Officials are investigating the source of the strike. The country’s defense ministry stated that three drones had entered the UAE from the “western border direction.” While two were intercepted, the third drone struck an electrical generator “outside the inner perimeter” of the Barakah Nuclear Power Plant in Abu Dhabi, igniting a fire. No injuries were reported, and there was no impact on radiological safety levels, according to local authorities.
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