Oil prices moved higher after US announced blockade of Iranian-linked cargoes exiting Persian Gulf, but price action shows traders think negotiations aren't over and blockade may be a gambit to move talks forward.

Questions about US will and means to enforce blockade, especially intercepting Chinese-owned ships, which would be geopolitically challenging. Oil market not pricing in full blockade for long period.

If US successfully blocks Iranian exports (which have flowed freely through strait during conflict), it would tighten global energy markets further and put more pressure on prices, causing them to ratchet higher.

Much Iranian oil goes to China, insulating China from war's energy impact. Market seems to be discounting how severe blockade will be.

This is biggest shock to global energy markets since Ukraine invasion. Missing 10 million barrels/day; if continues, will have to close gap by destroying demand through reduced flying, driving, and economic activity, eventually hitting economic growth.

IEA monthly report clearly states the supply shortfall. Drawing down reserves will eventually require demand destruction.