Trump's blockade of Iranian ports takes effect. Stocks are shrugging off escalation concerns.

By Victor Reklaitis

The president had said in a social-media post that the naval blockade would come into force at 10 a.m. Eastern time

A ship is seen in the Persian Gulf on Monday after the failure of U.S.-Iran peace talks.

The American military on Monday was implementing a blockade on all ships entering and exiting Iranian ports, with the escalation pushing oil prices higher but not rattling U.S. stocks that much.

President Donald Trump and the Pentagon said in separate social-media posts that the blockade would be starting at 10 a.m. Eastern time.

Brent crude (BRN00) recently was up 5% to around $99 a barrel, while West Texas Intermediate crude (CL00) (CL.1) rose 3% to $99 a barrel. The U.S. stock-market benchmark S&P 500 SPX gained 0.4% while the Dow Jones Industrial Average DJIA edged up 0.1% and the Nasdaq Composite COMP tacked on 0.7%.

Trump's blockade is an effort to put pressure on Iran after weekend talks in Pakistan failed to produce an agreement.

The failure of the talks was "not a shock," said Tobin Marcus, head of U.S. politics and policy at Wolfe Research, in a note. Marcus added that Trump's announcement of a blockade was "more of a surprise," but he emphasized that it is limited compared with the U.S. president's "more expansive initial framing" of the move. Trump initially had said the U.S. Navy would blockade all ships trying to enter or leave the Strait of Hormuz.

The blockade is rattling markets, but stocks in afternoon trading were managing to add to their gains from last week, which came as the U.S. and Iran agreed on a cease-fire set to last two weeks. Such moves reflect an assessment by traders that the two sides for now are "not going right back to the worst-case scenarios of high-intensity war," Marcus said.

Trump said in a fresh social-media post just after 10 a.m. Eastern time that the U.S. military previously had not hit any of Iran's "fast attack ships" because they were not considered much of a threat, but added that if "any of these ships come anywhere close to our BLOCKADE, they will be immediately ELIMINATED."

In addition, the president told reporters at the White House on Monday afternoon that Iran is "doing no business." He also sounded somewhat upbeat about reaching an agreement with Iran.

"We've been called this morning by the right people, the appropriate people, and they want to work a deal," Trump told reporters. His comment was viewed as helping U.S. stocks climb to session highs.

The most likely outcome at this point for the conflict is no deal at all between the U.S. and Iran, but rather a "new status quo that is based on a nonagreement between the two sides," said Trita Parsi, an expert on U.S-Iranian relations and the co-founder and executive vice president of the Quincy Institute for Responsible Statecraft, a think tank in Washington, D.C.

Parsi said he sees the U.S. walking away and ending its involvement in the war, while Iran retains control over the Strait of Hormuz but opens the crucial waterway up for traffic and charges tolls. The tolls "will not be insurmountable," so oil tankers will go through that waterway again and oil prices will come down, Parsi said. His remarks came Monday during a press briefing hosted by the Quincy Institute.

"I can see that as being the most likely scenario, but it's not a satisfactory scenario to either side. It is unclear to me how stable it will be," he added.

Read more: Oil prices climb as U.S. military blockade of Iranian ports takes effect

At least two oil tankers reversed course near the Strait of Hormuz shortly after the start of the U.S. blockade, according to tracking service MarineTrack, which is part of data and analytics firm Kpler.

That's after 34 vessels, including two oil tankers headed to China from Saudi Arabia and Iraq, transited the strait over the weekend as talks in Pakistan were underway. That followed more crossings last week ahead of the negotiations, which ended in a stalemate.

Historically, about 80% of crude and crude products passing through the strait have headed to Asia, with the rest bound for Europe. Several Asian countries have curbed crude consumption by instituting four-day workweeks, early closures and other measures, while a European airport-industry group has warned of jet-fuel shortages for the continent.

Analysts at J.P. Morgan estimated in a recent note that commercial crude inventories for the Organization for Economic Co-operation and Development, which has 38 member countries, could fall toward operational minimums by early May.

Claudia Assis contributed.

-Victor Reklaitis

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