Oil prices fluctuated violently on Monday as markets digested President Trump’s weekend ultimatum threatening to “obliterate” Iran’s power plants if Tehran fails to fully reopen the Strait of Hormuz within 48 hours. Brent crude traded above $113 per barrel, reversing initial losses as the deadline approached without any indication that Iran would comply. Iran’s parliament spokesperson Mohammad Baqer Qalibaf responded by warning that critical infrastructure and energy facilities across the Gulf region could be “irreversibly” targeted if the U.S. strikes Iran’s electrical grid. The exchange raised the prospect of further regional infrastructure destruction that would deepen the supply crisis regardless of the outcome of Trump’s ultimatum.
Goldman Sachs issued a stark warning: if Hormuz flows remain at 5% of normal levels through April 10, daily Brent prices will likely exceed their 2008 record of approximately $147 per barrel. The bank noted that governments’ recognition of concentrated supply risk and limited domestic spare capacity could lead to greater stockpiling activity, further supporting long-dated crude prices. The Brent-WTI spread widened to more than $14, a level that some analysts interpreted as approaching the “peak intensity” of the current crisis, though that assessment assumed a resolution timeline that remained highly uncertain.
Asian equity markets traded with extreme caution. Japan’s Nikkei 225 fell further from its February highs, with the index now approximately 12% below its all-time peak. Defense stocks continued to outperform, but the broader market was weighed by the prospect that the oil shock would persist through the second quarter, compressing corporate earnings and forcing central banks into policy responses that equity markets would view negatively. The KOSPI maintained relative stability near the 5,300 level, with semiconductor names providing support, but the index’s year-to-date gain had been cut substantially from the 40%+ peak reached in late February.
The IEA’s emergency reserve release of 400 million barrels, agreed on March 11, was being drawn down faster than anticipated. Oil stored on tankers was depleting quickly, and onshore inventories were projected to fall to multi-year lows as early as August if the strait remained closed. TD Securities warned that as inventory buffers erode, the physical tightness seen initially in Asia would cascade globally, pushing crude and refined product prices higher until demand destruction takes hold. Shell CEO Wael Sawan warned that fuel shortages would ripple around the world, beginning with jet fuel, followed by diesel, and finally gasoline.
The diplomatic landscape offered limited reassurance. Trump’s ultimatum introduced a binary risk: compliance by Iran, which appeared improbable, would trigger a relief rally of historic proportions; escalation through U.S. strikes on Iranian power infrastructure would deepen the crisis and potentially broaden the conflict to include retaliatory strikes on allied energy facilities across the Gulf. The IRGC had declared the strait closed, and while some limited traffic, primarily Iranian and Chinese-flagged vessels paying tolls in yuan, continued through an alternative channel north of Larak Island, the waterway remained functionally impaired for global commerce.
For portfolio managers, the Monday session crystallized the choice that the Iran conflict has imposed on Asian market participants. The structural investment themes that drove the January-February rally, AI semiconductors, Japanese fiscal expansion, Korean governance reform, remain valid over a multi-year horizon. But the near-term environment is defined by an energy supply crisis with an unknown resolution timeline and the potential for further escalation. Positioning requires a barbell approach: maintaining core exposure to the sectors with strongest fundamental support, particularly AI-driven semiconductor demand, while hedging aggressively through energy futures, yen call options, and reduced gross exposure. The coming days will determine whether Trump’s ultimatum produces a resolution or an escalation, and portfolios must be prepared for either outcome.
