Frank Okon

The confrontation between United States and Iran over the control of the Strait of Hormuz rattled the global commodity and equity markets on Monday when Iran claimed it hit a US warship, raising fears that bombs would soon start raining on the Islamic Republic once again.

Commodity market responded with jumps in prices as crude oil prices as war sentiments overtook the market and concerns rose over security of supplies. Stock markets also fell in response to the news that a US war ship was hit.

A large fleet of merchant and military vessels are currently in the Strait of Hormuz as the US naval forces push back Iranian forces in a powerful move to force the shipping channel open to global trade.

Iran’s state-linked Fars News Agency reported that two missiles struck an American naval vessel near the strategic waterway, alleging the ship had ignored repeated warnings and entered restricted waters.

The US Central Command (CENTCOM) has since debunked the Iranian claims but admitted that Iran released a swarm of cruise missiles, drones and attack boats which, according to CENTCOM, were contained.

“We can confirm no U.S. Navy ships have been struck,” CENTCOM said, adding that American forces remain focused on supporting Project Freedom and securing maritime traffic in the region.

Despite the denial, markets reacted to the initial report with immediate concern with Brent crude surging as much as 5 percent during Monday’s session before easing slightly to settle around $111.95 per barrel, still up more than 3 percent. U.S. benchmark West Texas Intermediate followed a similar pattern, climbing to nearly $105 per barrel.

The sharp move reflected how sensitive energy markets remain to developments in the Strait of Hormuz, a narrow corridor that typically handles roughly one-fifth of global oil supply.

Investor sentiment shifted just as quickly in equities. Stocks retreated across major markets, with Wall Street pulling back from recent highs and Asian markets following suit. Key indexes in Hong Kong, Sydney, Singapore, Wellington, and Taipei all posted losses, as fears grew that the fragile ceasefire between Washington and Tehran could unravel.

The market volatility comes as Donald Trump pushes forward with Project Freedom, a military operation aimed at restoring safe passage for commercial shipping through the Strait of Hormuz.

The U.S. has deployed a significant force to the region, including guided-missile destroyers, more than 100 aircraft, unmanned systems, and roughly 15,000 personnel. The operation is framed by Washington as a defensive effort to escort and protect neutral shipping.

A senior Iranian commander warned that foreign forces entering the strait would face direct attack, while Iranian naval units claimed they had already blocked U.S. vessels from entering the waterway. Tehran has also framed the U.S. operation as an illegal attempt to impose control over contested waters.

The immediate impact has been a dramatic slowdown in maritime traffic. Tracking data showed that the Strait of Hormuz was nearly empty early Monday, with only a single sanctioned tanker recorded passing through. The absence of commercial shipping highlights the level of risk perceived by global operators.

Before the current disruption, the strait carried an estimated 20 million barrels of oil per day, making it one of the most important chokepoints in the global energy system.

The standoff has already spilled beyond the strait itself.

The United Arab Emirates reported that an energy installation in Fujairah had been hit, while its air defenses intercepted multiple missiles launched from Iran. Most were destroyed, though at least one fell into the sea.

Iran did not directly deny the incident but suggested it was a consequence of U.S. “military adventurism” in the region.

Meanwhile, diplomatic efforts continue in parallel with the military buildup. Washington says talks with Tehran are ongoing, with Trump describing them as “very positive.” Iranian officials have confirmed they are reviewing a U.S. response to a recent proposal.

Pakistan has also stepped in, facilitating the return of crew members from an Iranian vessel previously seized by U.S. forces, in what it described as a confidence-building measure.

Oil prices eased slightly on Tuesday but held most of Monday’s gains, with Brent trading just above $113 and WTI hovering near $104. Stocks, however, remained under pressure as investors weighed the risk of further escalation.

Analysts say the situation reflects a dangerous standoff, where both sides are signaling resolve without stepping into full-scale conflict.

“The U.S. has shown it can secure passage,” said Stephen Innes of SPI Asset Management. “But Iran has made clear that any approach to its strategic perimeter will be met with force.”

Analysts posit that even if tensions cool, economists warn that disruptions to energy flows and industrial supply chains could linger.

For now, markets remain on edge, watching closely as military operations, political rhetoric, and fragile diplomacy unfold side by side in one of the world’s most critical waterways.