Iranian attacks against the UAE compounded tensions that had been building over conflicting reports of military encounters in the Strait of Hormuz
Oil prices climbed and stocks fell Monday after Iran launched missile and drone attacks against the United Arab Emirates, activating the UAE's missile defense system for the first time since a U.S.-Iran ceasefire took effect in early April.
Brent crude rose 5% to about $115 a barrel, while U.S. West Texas Intermediate crude climbed about 3.7% to roughly $105. The Dow Jones Industrial Average shed more than 500 points, or about 1%. The S&P 500 and the Nasdaq $NDAQ each fell roughly 0.5%.
Ballistic missiles, cruise missiles, and drones were intercepted by air defenses, Abu Dhabi's Defence Ministry said. The ministry added that a fourth missile landed in the sea, while three "loitering munitions" were brought down before reaching the mainland, over Emirati waters. Residents of Dubai and Abu Dhabi received emergency alerts warning them to seek shelter immediately.
The attacks compounded tensions that had been building earlier in the day over conflicting reports of military encounters in the Strait of Hormuz. Iran's state-affiliated Fars News Agency separately claimed a U.S. warship was struck by two missiles off Jask island, an allegation the U.S. military rejected. State television reports cited by Reuters also quoted Iran's navy as claiming it had turned back American warships at the entrance to the strait. U.S. Central Command said on X $TWTR that "no U.S. Navy ships have been struck."
The trigger for much of the day's tensions was a plan announced by President Trump on Sunday called "Project Freedom," under which the United States would work to move cargo ships stranded in the Persian Gulf out through the strait. Tehran responded with a threat from a senior Iranian military commander that vessels — and in particular American forces — attempting to pass through the strait without prior coordination faced being attacked. Among the other incidents reported by the Times: a drone struck an ADNOC-owned oil tanker attempting to pass through the strait, a South Korean-flagged cargo vessel exploded and caught fire in the waterway, and Iranian state media accused its own forces of having fired warning shots at an American ship — a claim Washington denied.
Two U.S.-flagged commercial vessels were safely escorted through the strait by American military forces, according to The Wall Street Journal.
The fresh hostilities threaten a ceasefire that was already under strain. Struck in early April, the agreement was always intended as a temporary halt to hostilities — a window for nuclear talks — not a permanent end to the war. Diplomatic momentum from meetings between U.S. and Iranian officials in mid-April has since faded. Trump pushed back on the overture, telling reporters Friday that Iran's interest in negotiations stemmed from weakness — "because they have no military left" — and that he found the proposal insufficient.
Energy markets have been in turmoil since the U.S. and Israeli-led campaign against Iran got underway in late February, with Iran's shutdown of the Strait of Hormuz — a waterway that in normal times carries roughly a fifth of global oil supplies — striking at the heart of world energy flows. Brent crude briefly touched $126 a barrel in late April before retreating. Washington has retaliated by placing its own restrictions on vessels moving through Iranian ports.
