Oil Jumps 6% as Iran Reverses Course on Hormuz Strait Opening

Renewed conflict in the Strait of Hormuz shattered a brief period of optimism in global markets, sending oil prices surging more than 6% and equity futures tumbling after Iran reversed its decision to reopen the critical waterway. The move follows an attack and seizure of an Iranian-flagged cargo ship by a U.S. Navy destroyer over the weekend, pushing the eighth week of the conflict toward a pivotal moment with a U.S.-Iran cease-fire set to expire within days.

"While the situation remains volatile, our base case assumes a full-scale, uncontrolled escalation is not the most probable scenario as it does not serve the interests of either party," noted a global strategy report from China International Capital Corporation (CICC) released Sunday. The firm projects Brent crude could gradually fall toward an $80 per-barrel medium-term anchor if a major escalation is avoided, which would still allow the U.S. Federal Reserve room to cut interest rates.

Brent crude, the international benchmark, climbed to approximately $96 a barrel in early trading, while West Texas Intermediate crude saw a similar jump to around $88 a barrel. The spike unwound much of the relief from Friday, when Brent prices had dropped over 10% to $89.09 after Iran announced the strait was open. Futures on the S&P 500 pointed to a 1% decline at Monday's open.

The whiplash in prices underscores the immense stakes tied to the narrow waterway, which normally carries as much as one-fifth of the world’s oil supply. While the U.S. is sending a delegation to Pakistan for further negotiations, Iran reasserted “strict control” over the strait, attacking two Indian-flagged vessels just a day after declaring it open. The temporary reopening was already seen by analysts as fragile, limited to a 10-day window and requiring ships to use a specific channel near Iran's Larak Island.

A Three-Stage Conflict

The CICC report divides the conflict since its start on Feb. 28 into three distinct phases of strategic cost-benefit analysis. The first phase, from Feb. 28 to March 13, saw Iran absorb the primary costs of military strikes, causing Brent crude to soar 42.3% while most other financial assets fell.

A reversal occurred in the second phase (March 13 - April 12), as the U.S. faced rising "asymmetric costs" from high oil prices and market pressure. This led to de-escalation signals and a 7.7% drop in Brent prices, allowing risk assets to begin a selective recovery. The current third phase began around April 12, when the U.S. imposed a blockade on Iranian ports, shifting the economic burden back to Tehran and sparking a broader equity market rally even as oil prices remained elevated compared to pre-war levels.

Tech Stocks Defy Oil Pressure

A key feature of the market's reaction has been a stark divergence between technology stocks and the broader market. According to CICC's analysis covering the period from Feb. 28 to April 17, the tech-heavy Nasdaq and China's ChiNext index rallied 7.9% and 11.8%, respectively, hitting new highs.

Analysts at the firm argue that these sectors benefited from the easing of tail-risk fears without having to "bear the actual pressure of high oil prices." Their performance was driven by a combination of recovering risk appetite and upward revisions to earnings forecasts, a trend not seen in energy-sensitive sectors like industrials and transportation. This aligns with a broader market theme where capital has favored sectors with strong, independent secular growth drivers.

Looking forward, CICC outlines two potential paths. A continued stalemate, with the conflict simmering without a full resolution, would likely keep oil prices high, pressuring margins for downstream industries but allowing the tech-led market structure to persist. A comprehensive de-escalation, however, could trigger a rapid fall in oil prices and spark a valuation catch-up rally in cyclical sectors that have been suppressed by geopolitical and energy cost risks.

This article is for informational purposes only and does not constitute investment advice.