Concerns grew on Monday that the ceasefire between the United States and Iran might not hold after the U.S. said it had seized an Iranian cargo ship that tried to run its blockade and Iran vowed to retaliate.

Efforts to build a more lasting peace in the region likewise appeared to be on shaky ground, as Iran said it would not participate in a second round of negotiations that the U.S. had hoped to kick off before the ceasefire expires on Tuesday.

The U.S. has maintained a blockade of Iranian ports, while Iran has lifted and then reimposed its own blockade on marine traffic passing through the Strait of Hormuz, which typically handles roughly one-fifth of the world's oil supply.

The U.S. military said it fired on an Iranian-flagged cargo ship headed towards Iran's Bandar Abbas port on Sunday after a six-hour standoff, disabling its engines.

U.S. marines then rappelled from helicopters onto the vessel, U.S. Central Command said.

"We have full custody of their ship, and are seeing what's on board!" President Trump wrote on social media.

Iran's military said the ship had been traveling from China. "We warn that the armed forces of the Islamic Republic of Iran will soon respond and retaliate against this armed piracy by the U.S. military," a military spokesperson said, according to state media.

Oil prices jumped more than 5% and stock markets wobbled as traders fretted that the ceasefire would collapse and traffic in and out of the Gulf would remain at a bare minimum.

IRAN REJECTS PEACE TALKS

Iranian state media reported that Tehran had rejected new peace talks, citing the ongoing blockade, threatening rhetoric, and Washington's shifting positions and "excessive demands."

"One cannot restrict Iran's oil exports while expecting free security for others," Iran's First Vice President Mohammadreza Aref wrote on social media. "The choice is clear: either a free oil market for all, or the risk of significant costs for everyone."

Trump earlier warned Iran that the U.S. would destroy every bridge and power plant in Iran if Tehran rejected his terms, continuing a recent pattern of such threats.

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 neighbors.

PREPARING FOR TAKS THAT MIGHT NOT HAPPEN

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 U.S. 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 U.S. C-17 cargo planes landed at an air base on Sunday afternoon, carrying security equipment and vehicles in preparation for the U.S. 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 U.S.-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 U.S. bases.

Iran's parliament speaker, Mohammad Baqer Qalibaf, who has led Iran's side in the talks, 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.

Iran’s semi‑official Tasnim news agency reported that two liquefied petroleum gas tankers that attempted to transit the strait were turned back by Iran’s armed forces on Saturday. One of the tankers – the Angola‑flagged LPG tanker G Summer - later exited the Gulf on a second attempt, according to MarineTraffic vessel tracking data.

SECURITY UPDATE

Security company Windward reports that the brief Strait reopening was negated by renewed closure messaging, triggering 35 outbound vessel reversals over 36 hours. 

More than 177 tankers carrying Iranian cargo are currently on the water worldwide, most of them concentrated toward Asian and Middle Eastern destinations. Across that fleet, 163 are sailing under fraudulent flag registries with elevated Iranian sanctions compliance risk.

U.S. enforcement is expanding worldwide to board and seize Iran-linked vessels and now targets dual-use goods as conditional contraband.

(Reuters and staff)