Oil prices renewed gains and climbed further above $100 a barrel on Monday while stocks fluctuated as the Iran war moved into a third week, with both sides showing no sign of backing down and diplomats trying to ensure safe passage for tankers through the crucial Strait of Hormuz.
Crude shot up in the opening minutes after U.S. President Donald Trump said during the weekend that forces struck military targets on Kharg Island, a scrubby stretch of land in the Gulf that handles almost all of Iran's oil exports.
He also warned attacks could expand to energy infrastructure if the Islamic republic interferes with transit through Hormuz, which has been effectively closed since the U.S.-Israel operations began on Feb. 28.
Iran's Fars news agency reported soon after that no oil infrastructure was damaged in the strikes.
Trump urged other countries to send warships to keep the waterway open but offered no specifics or commitments from the U.S. side, saying he hoped China, France, Japan, South Korea and the U.K. would take part.
He later wrote Saturday in a Truth Social post: "The Countries of the World that receive Oil through the Hormuz Strait must take care of that passage, and we will help -- A LOT!
"This should have always been a team effort, and now it will be."
However, Japan said Monday it was "not at the moment considering issuing a maritime security operation," while Australia announced it would not send any navy ships to the region.
Trump said Tehran wanted a deal to end the fighting, but that he was not prepared to make one on current terms, without giving further details.
Iran's Foreign Minister Abbas Araghchi said his country was not interested in talks with Washington.
"We don't see any reason why we should talk with Americans, because we were talking with them when they decided to attack us," he told CBS's "Face The Nation" in an interview aired Sunday.
"We never asked for a cease-fire, and we have never asked even for negotiation," he added.
However, he did say he was ready to speak to countries "who want to talk to us about the safe passage of their vessels."
"I cannot mention any country in particular, but we have been approached by a number of countries" seeking such safe passage, Araghchi said.
The two sides continued to exchange fire Monday, with Saudi Arabia saying it had intercepted more than 60 drones since midnight, while flights were temporarily suspended at Dubai's airport after a "drone-related incident" sparked a fire nearby.
Araghchi described Israeli strikes on Tehran fuel depots as "ecocide" owing to the long-term risks to residents' health.
Traders hoping for an early end to the conflict were left disappointed after Trump's top economics adviser Kevin Hassett said the Pentagon estimates it could take up to six weeks, though the operation was ahead of schedule.
Both main crude contracts advanced. Brent shot up around 3% to as high as $106.50 before paring the gains to about $104, while West Texas Intermediate sat just above $99.
The rise came as Japan said it was beginning the release of its strategic oil reserves after the International Energy Agency (IEA)indicated earlier that the release would begin in Asia and Oceania before other regions.
IEA members agreed last week to release a record 400 million barrels from stockpiles to cushion the surge in prices caused by the war.
With worries growing about a possible energy crisis that could hammer the global economy, equity markets remained under pressure.
Tokyo, Shanghai, Sydney, Wellington, Taipei, Manila and Jakarta were all down, though Hong Kong, Seoul, Singapore, Mumbai and Bangkok rose.
"The impact of geopolitical events on markets, and the macro outlook, hinges more on when transits through the Strait of Hormuz begin to normalise, than it does on when hostilities come to an end," wrote Michael Brown at Pepperstone.
"The longer the Strait is impassable, the tighter commodity supply will become, thus the higher prices will likely go, and the greater the inflationary impulse that will follow."
Adding to economic concerns was data showing Friday that fourth-quarter U.S. gross domestic product (GDP) expanded 0.7%, much slower than the initial reading of 1.4%.
And delayed figures showed the Federal Reserve's preferred inflation gauge dipped to 2.8% in January before energy prices shot higher.
"Developments over the weekend, while no more disconcerting than at the end of last week, don't offer any obvious pretext for a less pessimistic start to the new trading week," warned National Australia Bank's Ray Attrill.
Also in view this week are policy meetings at seven major central banks, including the Fed, Bank of England (BoE) and the European Central Bank (ECB)
While they are expected to stand pat on interest rates, any remarks on the impact of the war on their respective economies will be closely followed.
Key figures at around 07:00 GMT
West Texas Intermediate: up 0.6% at $99.30 per barrel
Brent North Sea Crude: up 1.5% at $104.68 per barrel
Tokyo — Nikkei 225: down 0.1% at 53,751.15 (close)
Hong Kong — Hang Seng Index: up 1.4% at 25,832.06
Shanghai — Composite: down 0.3% at 4,084.79 (close)
Euro/dollar: up at $1.1426 from $1.1416 on Friday
Pound/dollar: up at $1.3242 from $1.3223
Dollar/yen: down at 159.40 yen from 159.74 yen
Euro/pound: down at 86.27 pence from 86.33 pence
New York — Dow: down 0.3% at 46,558.47 points (close)
London — FTSE 100: down 0.4% at 10,261.15 (close)
