Global oil prices have jumped after US President Donald Trump said its navy had intercepted and seized an Iran-flagged cargo ship.
The Brent crude benchmark oil price jumped 5% to around $95 (£70) a barrel, reversing the slump on Friday when Iran said the Strait of Hormuz would be “completely open” to commercial vessels for the remainder of the ceasefire.
On Saturday, Iran said it was closing the strait again and that any ship that approached it would be targeted.
The waterway is of key importance as usually about 20% of the world’s oil and liquefied natural gas passes through it.
Energy markets have seen wild swings since the US and Israel attacked Iran on 28 February and Tehran responded with threats to target shipping in the strait.
Trump has said his representatives will be in Pakistan on Monday for negotiations. A White House official said Vice-President JD Vance would lead the US delegation.
But Iran’s state media said Tehran had “no plans for now to participate” in the talks, although Iranian officials have not clarified the country’s position yet.
“Oil markets continue to gyrate in response to oscillating social media posts by the US and Iran, rather than the realities on the ground which remain challenging for oil flows to resume in a rapid fashion”, analyst Saul Kavonic from financial services firm MST Marquee told the BBC.
“This is all part of negotiations, physically playing out in real time on the Strait of Hormuz.”
Shanti Kelemen, co-chief investment officer at 7 Investment Management, said there was “a bit of fatigue” in the market given the “chopping and changing” in the situation.
“I think the market stopped believing the words, and will look more towards the actions,” she told the BBC.
The Strait of Hormuz remained closed on Sunday, a day after the Islamic Revolution Guard Corps (IRGC) said it was ending a temporary reopening over the US blockade, which it said violated the terms of their ceasefire agreement. Iran said it would stay closed until the US ended its naval blockade.
Trump had said on Friday that the naval blockade would continue until a deal was agreed by the two countries.
Stock markets were mixed on Monday. In Europe, the FTSE 100 index of the biggest firms listed in the London fell 0.7%, while Germany’s Dax and France’s Cac 40 were both down more than 1%.
However, Asian markets had risen earlier, with Japan’s Nikkei index closing up 0.6% and South Korea’s Kospi climbing 0.4%.