US seizes Iranian cargo ship in Strait of Hormuz; Iran vows retaliation

The United States attacked and seized an Iranian cargo ship that tried to evade its blockade near the Strait of Hormuz. US President Donald Trump confirmed the same on Sunday.

This comes on the heels of a fragile ceasefire between Iran and United States which grows more precarious with each passing second. Iran on the other hand, said it would not participate in ⁠a second round of peace talks with its military command vowing to retaliate.

The United States has maintained a blockade ‌of Iranian ports, while Iran has lifted and then reimposed ​its own blockade of the Strait of Hormuz, which before the war began almost two months ago handled roughly one-fifth of the world's oil supply.

Trump said on Sunday that the US military took control of an Iranian-flagged cargo ship that had tried to get past the blockade. "We have full custody of their ship, and are seeing what's on board!" he wrote on social media, adding that US forces blew a hole in the vessel's engine room.

Iran's official IRNA state news agency, meanwhile, reported that Tehran had ​rejected new peace talks, citing the ongoing blockade and Washington's ⁠shifting positions and "excessive demands."

Trump had earlier warned Iran that the United States would destroy every bridge and power plant in Iran if Tehran rejects his terms, continuing a pattern of such threats throughout the war.

Iran has said that if the United States were to attack its civilian infrastructure it would hit power stations and desalination plants of Gulf Arab neighbours.

Vance to again lead talks

Trump said his envoys would arrive in Islamabad on Monday evening, one day before ⁠a two-week ceasefire ends. A ‌White House official had said the US delegation would be headed by Vice President JD Vance, who led the war's first peace talks a week ago, and also include Trump's envoy Steve Witkoff and son-in-law Jared Kushner. Trump had separately told ABC ‌News and MS Now that Vance would not go.

Pakistan, which has served as the main mediator, appeared to be preparing for the talks. Two giant US C-17 cargo planes landed at an air base ⁠on Sunday afternoon, carrying security equipment and vehicles in preparation for the US delegation's arrival, two Pakistani security sources said.

Municipal authorities in the capital city of Islamabad halted public transport and heavy-goods traffic through the city. Barbed wire was rolled ‌out near the Serena Hotel, where last week's talks were held. The hotel told all guests to leave.

The apparent diplomatic setback ‌could set the stage for a renewed surge in oil prices when markets reopen after the weekend.

Now in its eighth week, the war ‌has created the most severe shock to global energy supplies in history, sending oil prices surging because of the de facto closure of the ‌strait.

Thousands of people have been killed by US-Israeli strikes on Iran and in an Israeli invasion of Lebanon conducted in parallel since the war began on February 28. Iran responded to the attacks with missiles and drones against its Arab neighbours that host US bases. Iran's chief negotiator, Mohammad Baqer Qalibaf, had earlier said the two sides had made progress but were still ⁠far apart on nuclear issues and ⁠the strait.

European allies, repeatedly criticized by Trump for not aiding his war effort, worry that Washington's negotiating team is pushing for a swift, superficial deal that would require months or years of technically complex follow-on talks.

Tankers reported turned back at Strait

Two liquefied petroleum gas tankers attempted to transit the Strait on Saturday morning but made a U-turn after reaching waters south of Larak Island, MarineTraffic vessel tracking data showed. Iran’s semi-official Tasnim news agency reported that the vessels were turned back by Iran’s armed forces. One of the tankers – the Angola-flagged LPG tanker G Summer - later exited the Gulf on a second attempt on Saturday evening, signaling "China owner," according to the data.

Friday's announcement that the strait would reopen caused the sharpest one-day drop in oil prices in years and boosted stock markets to all-time ​highs.

Amrita Sen, founder of the Energy Aspects think tank, predicted oil prices would rise on Monday when traders returned to their desks having realised they ​might have been overly optimistic.

"Events over the weekend with Iran firing ​on merchant vessels and shutting the strait again highlight just how precarious the situation is," Sen said. Pressure for a way out of the war has mounted on Trump as his fellow Republicans prepare to defend narrow ​majorities in Congress in the November midterm elections, with US gasoline prices high, inflation rising and his own approval ratings down.

(with Reuters inputs)