World awaits fate of ceasefire after US seizes Iranian ship

Concerns grew on Monday that the ceasefire between the United States and Iran might collapse after the US 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 also appeared under threat, as Iran said it would not participate in a second round of negotiations that the US had hoped to kick off before the ceasefire expires.

The US 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 US 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. US marines then rappelled from helicopters onto the vessel, US 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 travelling 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 US military," a military spokesperson said, according to state media.

Oil prices jumped more than 5 per cent 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 US would destroy every bridge and power plant in Iran if Tehran rejected his terms, continuing a recent pattern of such threats.

PREPARING FOR TALKS 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 told Reuters the US 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. But Trump told ABC News and MS Now that Vance would not go.

Pakistan, which has served as the main mediator, was still gearing up for the talks on Monday.

Nearly 20,000 police, paramilitary and army personnel have been deployed across the capital Islamabad, a government and a security official said, adding that the area around the venue for the second round of talks had been vacated.

Public transport across the city has also been suspended.

"Special security measures have been taken for all of our special guests," Pakistan's Interior Minister Mohsin Naqvi said in a statement, adding that he had briefed US ambassador Natalie Baker on the security measures for the talks.

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 criticised 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.

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 US-Israeli strikes on Iran and in an Israeli invasion of Lebanon conducted in parallel since the war began on February 28.