The fragile two-week ceasefire between the United States and Iran is showing dangerous cracks, sending crude prices soaring and forcing one of the world's largest oil exporters to invoke emergency contractual protections. Oil prices jumped more than 5% in Monday trading on fears that the ceasefire between the United States and Iran could collapse after the U.S. seized an Iranian cargo ship and traffic through the Strait of Hormuz remained largely halted.

Brent crude futures advanced $4.61, or 5.1%, to $94.99 a barrel and U.S. West Texas Intermediate was up $4.33, or 5.16%, at $88.18. The moves came despite both contracts tumbling by 9% on Friday for their largest daily declines since April 18 after Iran said that passage for all commercial vessels through the Strait of Hormuz was open for the remainder of the ceasefire. The whipsaw reflects the razor-thin margin between hope and catastrophe in global energy markets.

The turning point came Sunday when the U.S. military fired "several rounds" towards an Iranian-flagged ship attempting to violate the US naval blockade, and the US ultimately seized the Iranian-flagged "Touska," according to US Central Command. Iran's military warned that it would soon respond and "retaliate against this U.S. armed piracy," according to state media. With a two-week ceasefire between Washington and Tehran set to expire on Wednesday, the clock is ticking on what may be the last chance to prevent a full resumption of hostilities.

Kuwait's Force Majeure Signals Physical Reality

The situation escalated from geopolitical theater to contractual reality when Kuwait declared force majeure on shipments of crude oil and refined products as the blockade of the Strait of Hormuz makes it impossible to meet obligations to customers that can't bring vessels into the Persian Gulf. State-run Kuwait Petroleum Corp. notified customers on Friday, according to a document obtained by Bloomberg News, though the notice does not mean all supplies stop immediately.

A force majeure declaration gives a supplier legal cover to miss or delay deliveries when events outside its control block performance. In this case, Kuwait is signaling that tanker access, not just upstream production, has become the binding constraint. The move underscores how the Hormuz blockade has shifted from a headline risk to a supply chain crisis. Shipping traffic through the Strait of Hormuz remained at a virtual standstill on Monday, with only three crossings in the past 12 hours, shipping data showed.

The physical constraints are severe. The U.S. government estimated that more than 9 MMbpd of oil production would be shut in during April. Kuwait has suffered multiple hits to oil infrastructure, and output is now at levels last seen in the early 1990s after the Iraqi invasion.

US Refiners Reap Windfall While Consumers Pay

While Middle Eastern producers struggle, American refiners are capturing unprecedented margins. US Gulf Coast refiners are benefiting from some of the strongest margins in years, as disruptions to Middle Eastern oil flows during the Iran conflict boost global demand for American fuel exports. The supply shock—triggered by Iran's blockade of the Strait of Hormuz—has hit Asian and European refiners particularly hard, forcing some to scale back production. In contrast, US refiners have been able to ramp up output and capitalize on tightening global fuel supplies.

The margin expansion is dramatic. US ultra-low sulfur diesel futures are trading at a premium of more than $72 per barrel over West Texas Intermediate crude, up sharply from about $40 before the conflict. Gasoline futures have also widened, reaching a near $26 premium compared to around $18 previously. The disruption has driven a surge in US refined product exports, which hit a record in March, according to ship-tracking data. This has significantly boosted refining margins after a period of global oversupply.

But the gains come at a cost to consumers. Rising export demand is contributing to higher domestic fuel prices, as refiners receive better prices abroad despite US gasoline and diesel trending toward record highs at the pumps. According to market data, natural gas rose to 2.71 USD/MMBtu on April 20, 2026, up 1.48% from the previous day. Meanwhile, the EIA forecasts retail gasoline prices to peak at a monthly average of close to $4.30 per gallon in April and average more than $3.70/gal this year. Diesel prices peak at more than $5.80/gal in April and average $4.80/gal in 2026.

Golden Pass LNG Nears First Export Amid Geopolitical Chaos

In a rare bright spot for US energy markets, the LNG tanker HL Sea Eagle is expected to arrive at the Golden Pass export terminal in Texas on April 20 to load the plant's first cargo of liquefied natural gas for export, according to a trading source and LSEG ship-tracking data. Golden Pass LNG, a joint venture between QatarEnergy (70%) and ExxonMobil (30%), has achieved first liquefied natural gas production from the first of its three trains at the Sabine Pass, Texas, facility. The milestone signals the transition of the $10+ billion project into its operational phase, with initial cargo exports anticipated in the second quarter of 2026. The project has a total capacity of approximately 18 million tonnes per annum (mtpa), positioning it among the largest LNG export facilities in the United States.

The timing is fortuitous. The startup of Golden Pass LNG comes at a pivotal moment for global gas markets, where supply diversification and energy security remain top priorities, particularly following recent geopolitical disruptions and sustained demand growth in Europe and Asia. LNG export capacity is on track to increase from about 17 Bcf/d at the end of 2025 to slightly more than 19 Bcf/d in 2026.

The next 72 hours will determine whether the ceasefire holds or whether oil markets face another shock. According to market analyst Nikos Tzabouras at Tradu, "The strait remains under a double blockade, uncertainty around an agreement is higher than ever and Tuesday's ceasefire deadline hangs over markets." For now, energy markets are pricing in the worst.

Reporting based on coverage from Reuters, Bloomberg, Financial Times, OilPrice.com, Natural Gas Intel, Detroit News, RTE, Al Jazeera, CNBC, Trading Economics, and the U.S. Energy Information Administration.