The US President Donald Trump has set a deadline for Iran to reopen the crucial Strait of Hormuz shipping route, causing global oil prices to become highly volatile. Global benchmark crude rose 1.4% to $111.33 a barrel, while US-traded oil gained 2.8% to $115.61.

The situation has reached a critical point after Trump threatened to act against Iran “in one night” if it fails to agree to a deal with the US by 20:00 Washington DC time on Tuesday. Shipments of oil and gas from the Middle East have been severely disrupted following Iran's move to block the Strait in retaliation for US airstrikes that began on February 28.

While speaking at the White House, Trump said he believed there are "reasonable" leaders in Iran negotiating in good faith, but the result remains uncertain. The surge in prices suggests that investors believe it may be harder than expected for the US to reach a definite deal due to Iran’s uncompromising stance and that the war could be drawn out. Traders are also trying to determine whether Trump actually wants a deal or if he is “just putting up a smokescreen” while preparing a larger attack, according to Ye Lin from research firm Rystad Energy.

Energy prices have been severely affected by global supply chain bottlenecks, raising concerns about higher international inflation. A fifth of the world’s oil and gas shipments typically pass through the narrow waterway. Major Asian economies, including Japan and South Korea have been specifically impacted by the disruptions, as they are heavily dependent on Middle Eastern energy. According to the BBC, Trump has convinced several countries to send warships to the region to ensure vessels can safely pass through the waterway. 

Nonetheless. rhetoric has tightened as the market refuses to capitulate amid growing global volatility.