LONDON — Oil prices surged over six percent in early trading on Monday (April 20) due to concerns that the ceasefire between the US and Iran could break down after the US seized an Iranian cargo ship, while traffic through the Strait of Hormuz remained largely disrupted.

Brent crude futures increased by US$5.51 (S$7), or 6.1 percent, reaching US$95.89 a barrel by 7:52 am GMT (3:52 pm SGT), while US West Texas Intermediate rose by US$5.46, or 6.5 percent, to US$89.31.

Both contracts fell by nine percent on Friday, marking their largest daily decline since April 18, following Iran's announcement that passage for all commercial vessels through the Strait of Hormuz would be open for the duration of the ceasefire.

US President Donald Trump stated that Iran had agreed to never again close the strait, through which approximately one-fifth of the world's oil supply flows, prior to the onset of the war nearly two months ago.

"Within 24 hours of Friday's 'completely open' announcement, there were already tankers fired upon by the Islamic Revolutionary Guard Corps (IRGC)," noted Sparta Commodities analyst June Goh.

"Market fundamentals are worsening, as 10-11 million barrels per day of crude oil production remains halted," Goh added, highlighting the impact on oil production.

On Sunday, the US announced the seizure of an Iranian cargo ship attempting to breach its blockade, while Iran warned of retaliation, escalating fears of renewed hostilities.

Tehran also indicated it would not participate in a second round of negotiations that the US had hoped to initiate before the two-week ceasefire expires this week.

"The financial market is trading on negotiations, improvements, and resolutions, while the physical market is deteriorating daily," stated SEB Research analyst Bjarne Schieldrop.

"Physical oil flows remain constrained by disrupted routes, increased voyage times, and higher freight and insurance costs."

According to Kpler data, more than 20 ships passed through the strait on Saturday, transporting oil, liquefied petroleum gas, metals, and fertilizers. This was the highest number of vessels to cross the waterway since March 1.