Financial markets entered Tuesday in a state of suspended animation as U.S. President Donald Trump's self-imposed deadline for Iran to reopen the Strait of Hormuz — set for 8:00 p.m. Eastern Time — cast a binary shadow over every asset class. Benchmark West Texas Intermediate crude oil climbed to $112.41 per barrel and international Brent settled at $109.77, with both contracts trading roughly 66% above their pre-war levels from February 28, when Operation Epic Fury commenced.
The Strait of Hormuz closure has created what energy analysts are calling the largest oil supply disruption in modern history. Before hostilities began, approximately 20% of global crude oil and liquefied natural gas supply transited the narrow waterway daily. TD Securities estimates that nearly one billion barrels of oil equivalent will have been removed from global supply by month-end, comprising approximately 600 million barrels of crude and 350 million barrels of refined products. The national average gasoline price reached $4.11 per gallon on Sunday, a 38% increase from $2.98 before the war, according to AAA.
President Trump doubled down on his threat Monday, warning via Truth Social that Iran's bridges, power plants, and civilian energy infrastructure would face complete demolition if the Strait remained closed past Tuesday's deadline. The White House confirmed the 8 p.m. ET timeline had not changed despite ongoing diplomatic activity. Trump specifically warned that Iranian officials would be living in Hell if the maritime corridor was not reopened unconditionally to all commercial traffic by the deadline.
A potential diplomatic breakthrough emerged from Pakistan. Multiple sources confirmed that Washington and Tehran are engaged in preliminary talks mediated by Gulf state intermediaries and Pakistani officials in what negotiators have privately dubbed the Islamabad Accord. The proposed framework centers on a 45-day ceasefire that would reopen the Strait, suspend active airstrikes, and establish a formal negotiations structure toward a permanent agreement. Axios reported that the probability of reaching a deal before Tuesday's hard deadline was slim, keeping markets in a state of binary anticipation as the session progressed.
U.S. equity markets reflected the uncertainty, with the S&P 500 oscillating around the 6,611 level and the CBOE Volatility Index surging nearly 6% to 25.30, an unusual divergence from the relative stability of equity prices. Defense stocks reversed sharply lower on April 6 as ceasefire hopes emerged, with Lockheed Martin, RTX, and Northrop Grumman retreating after a powerful multi-week rally driven by the proposed $1.5 trillion defense budget and active munitions demand during the campaign.
The economic consequences of the oil shock are becoming increasingly embedded in inflation expectations. Wells Fargo Investment Institute announced on Monday that it no longer expects the Federal Reserve to cut interest rates at any point in 2026, citing the noticeable but likely transient inflation bump from energy prices alongside elevated uncertainty from geopolitical developments as reasons for the Fed to remain on hold indefinitely. The firm had previously forecast two rate cuts this year. The Bureau of Labor Statistics is scheduled to release the March Consumer Price Index on Friday, April 10, with consensus projecting headline CPI accelerating from 2.4% year-over-year in February to approximately 3.2% — the first major inflation reading to capture the full energy price shock from the Strait closure.