Global energy and financial markets were rattled on Monday as oil prices surged past $100 a barrel and equities fell across Asia and the United States, after a marathon round of US-Iran peace talks in Pakistan collapsed without agreement, prompting President Donald Trump to order the US Navy to blockade the Strait of Hormuz, one of the world’s most critical oil transit corridors.
Brent crude jumped 6.8% to nearly $102 a barrel, while the S&P 500 was set to open 0.6% lower. Global bonds were moderately weaker, with the yield on two-year Treasuries up three basis points to 3.82% as traders pared bets on a Federal Reserve interest-rate cut in 2026. The dollar rose 0.3%, its biggest advance in more than a week.
Equities fell across Asia, with markets in Tokyo, Hong Kong, and Seoul down at least one percent, while Shanghai, Sydney, Singapore, Taipei, and Jakarta also declined.
The negotiations which lasted 21 hours were the first face-to-face engagement between the United States and Iran since 2015, when the Obama administration negotiated a nuclear deal that was later scrapped by Trump, and the highest-level discussions between the two sides since the 1979 Islamic Revolution.
The US delegation was led by Vice President JD Vance, accompanied by special envoy Steve Witkoff and Jared Kushner. The Iranian delegation was led by Foreign Minister Abbas Araghchi and Parliament Speaker Mohammad Bagher Qalibaf, with approximately 70 officials and experts from diplomatic, military, and economic fields.
Announcing the breakdown, Vance said: “The bad news is that we have not reached an agreement. And I think that’s bad news for Iran much more than it’s bad news for the US. They have chosen not to accept our terms.” He cited Iran’s refusal to commit to giving up its nuclear programme as the central sticking point, saying: “We need to see an affirmative commitment that they will not seek a nuclear weapon. We haven’t seen that yet.”
Iran’s foreign ministry spokesman Esmail Baghaei acknowledged partial progress but pointed to unresolved gaps: “On some issues we actually reached mutual understanding, but there was a gap over two or three important issues and ultimately the talks didn’t result in an agreement.” He said the talks grew more complicated as new issues were introduced, including the Strait of Hormuz and broader regional dynamics.
Iran, under its 10-point negotiation plan, had demanded an end to Israel’s attacks on Hezbollah, the release of $6 billion in frozen assets, guarantees around its nuclear programme, and the right to charge ships passing through the Strait of Hormuz.
Trump responded swiftly and forcefully to the breakdown. “Effective immediately, the United States Navy, the Finest in the World, will begin the process of BLOCKADING any and all Ships trying to enter, or leave, the Strait of Hormuz,” Trump wrote on Truth Social. “Any Iranian who fires at us, or at peaceful vessels, will be BLOWN TO HELL!”
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Trump also said the US would instruct its Navy to “seek and interdict every vessel in International Waters that has paid a toll to Iran,” warning that “no one who pays an illegal toll will have safe passage.” He specified the blockade would apply to vessels travelling to or from Iranian ports. The US military announced it would blockade all Iranian Gulf ports from Monday at 1400 GMT, effectively seizing control of maritime traffic.
Earlier on Sunday, Trump had written that “the meeting went well, most points were agreed to, but the only point that really mattered, NUCLEAR, was not.”
Iran’s Revolutionary Guards responded by saying its security forces had full control over the strait and warned enemies would be trapped in a “deadly vortex” in case of any “wrong move.” Iran’s navy chief Shahram Irani dismissed Trump’s blockade threat as “ridiculous and funny.”
Pakistan, which brokered the talks and hosted both delegations, said it would continue to play a mediating role, with Foreign Minister Ishaq Dar urging both sides to continue to uphold the fragile two-week ceasefire. Vance also left open the possibility that a deal could still be reached, saying: “We leave here with a very simple proposal: a method of understanding that is our final and best offer. We’ll see if the Iranians accept it.”
Analysts noted that while oil moved sharply, the broader market reaction was relatively measured, suggesting investors have already priced in much of the geopolitical risk and are growing less reactive to headlines. International benchmark Brent for June delivery advanced 7% to $102.17.
Michael Yoshikami of Destination Wealth Management expressed cautious optimism, saying: “I’m pretty confident that oil is going to go down from here. We’re going to see oil at $80 a barrel again,” citing expectations that the US and Iran will eventually reach a negotiated resolution. Standard Chartered’s Steve Brice said higher oil prices would push back prospects for easier monetary policies, putting upward pressure on bond yields and the US dollar, but described the developments as “temporary.”
Analysts, however, caution that the failure in Islamabad reflects deeper structural divisions. Fawaz Gerges, professor of international relations at the London School of Economics, told NBC News that it was “no surprise” the talks failed, noting that Iran sees the Strait of Hormuz as “their most potent weapon,” while a US insistence on Tehran surrendering its uranium enrichment capacity remains a “nonstarter” for the Iranians.
With the two-week ceasefire now under severe strain and a US naval blockade taking effect, the path toward a negotiated end to the six-week conflict appears, for now, considerably more uncertain.