The two-week ceasefire between the United States and Iran is unravelling, and global markets are pricing in the consequences. Oil prices surged above $106 a barrel for Brent crude on Friday, recovering all the ground lost during the brief diplomatic respite, after Tehran released footage of its commandos boarding a cargo vessel in the Strait of Hormuz and its air defences engaged what it called ‘hostile targets’ over the capital. The price jump, which pushed West Texas Intermediate above $97, came despite President Donald Trump’s offhand assurance that Iran had only augmented its weaponry ‘a little bit’ during the truce and that American forces could neutralise it within a day.

Viewed from Tehran, the propaganda operation was a clear signal that the Islamic Republic retains the upper hand in the world’s most critical energy chokepoint. Iran has vowed it will not reopen the Strait of Hormuz — through which one-fifth of global oil passes — as long as the United States blocks its ports. For Washington, the deadlock has become a test of whether economic coercion or military posturing will ultimately dictate terms.

The Trump administration had hoped that the ceasefire would pave the way for a broader deal, but the talks have stalled, and both sides now appear to be digging in for a prolonged standoff that pits naval leverage against financial sanctions. The market response has been anything but uniform. Asian shares struggled on Friday, with the MSCI Asia-Pacific index barely in positive territory and Japan’s Nikkei dipping after briefly touching 60,000 earlier in the week.

European bourses opened weaker, and US futures pointed to a lower open, breaking a streak of record highs fuelled by strong corporate earnings. Analysts in London note that the equity retreat reflects a stark realisation: the ceasefire was always a fragile pause, not a resolution. The benchmark oil contract is now back above $100 a barrel, threatening to reignite inflation and complicate central bank policy across the developed world.

The dollar has held its recent gains, while Treasuries sold off on renewed inflation anxiety. In the Middle East, the mood is darker. Iran’s release of the commando boarding video — alongside reports of a power struggle between hardliners and moderates in Tehran — suggests the faction most sceptical of diplomacy is regaining control.

A Chinese brokerage, Haitong Futures, observed in a note that the ceasefire increasingly looks like a prelude to war rather than peace. With the Strait of Hormuz effectively closed to normal traffic and no resumption of talks in sight, the next shock — whether a direct naval clash or a fresh cyberattack on energy infrastructure — may determine whether the current spike becomes a sustained surge. For now, investors are hedging their bets, but the window for a diplomatic escape is narrowing by the day.