US-Iran ceasefire comes at risk as violence erupts in the Gulf

The US-Iran ceasefire was pushed to the brink on Monday after the countries exchanged fire in the Gulf and Tehran warned that it would attack any vessels trying to transit the Strait of Hormuz.

In signs that the fragile truce was disintegrating, the US said Tehran had launched cruise missiles at American warships and commercial vessels and Donald Trump said the US had “shot down” Iranian small boats.

“We’ve shot down seven small Boats or, as they like to call them, ‘fast’ Boats. It’s all they have left,” the US president wrote in a social media message on Monday.

The United Arab Emirates also said it had intercepted Iranian missiles, although a drone strike hit a petrochemical site in Fujairah and a ship was set ablaze off the Emirati coast.

The eruption of more violence in the Gulf on Monday sent oil prices sharply higher — and came less than 24 hours after President Trump said the US would begin guiding ships through the strait in an operation called “Project Freedom”.

Trump’s plan drew a response from Tehran, which said it would attack vessels approaching the vital waterway, which has been mostly shut since the US and Israel launched the war on Iran in late February.

“We warn foreign armed forces, particularly the US aggressor army, that if they attempt to approach or enter the Strait of Hormuz, they will be attacked,” said Major General Ali Abdollahi, commander of Khatam al-Anbiya Central Headquarters.

The new escalation after weeks of fragile peace in the Middle East sent crude prices higher, with Brent settling up almost 6 per cent at $114.44 a barrel.

Wall Street’s S&P 500 share index closed 0.4 per cent lower and US debt also sold off, pushing the 30-year yield above 5 per cent.