Oil prices held around four-year highs Thursday while stocks fell after Donald Trump warned the US blockade of Iranian ports could last months as peace talks remained stalled.
While Tehran submitted a fresh proposal this week to reopen the crucial Strait of Hormuz, the US president reportedly did not believe it was not negotiating in good faith.
The Wall Street Journal said he had told national security officials to prepare for a long blockade to compel the Islamic republic to give up its nuclear programme.
At a meeting of oil executives Tuesday, he discussed efforts "to alleviate global oil markets and steps we could take to continue the current blockade for months if needed and minimise impact on American consumers", a White House official said on condition of anonymity.
Meanwhile, Trump told Axios: "The blockade is somewhat more effective than the bombing. They are choking like a stuffed pig. And it is going to be worse for them. They can't have a nuclear weapon."
He added that the naval action would not end until he had secured a deal with Tehran to address its nuclear programme.
In a post on his Truth Social platform, Trump said: "Iran can't get their act together. They don't know how to sign a nonnuclear deal. They better get smart soon!"
He posted an illustration of himself holding an assault rifle alongside the caption "NO MORE MR. NICE GUY!"
The prospect of the strait -- through which a fifth of world oil and gas passes -- being closed for months more sent crude surging to the highest level since 2022 after Russia invaded Ukraine.
Brent for June delivery, which hit a peak of $122.53 Wednesday, was sitting around $120 in Asian trade, while West Texas Intermediate was around $108.
Analysts said traders were beginning to shift to the view that the crisis will not be as short as initially hoped.
Tech's AI rally
Stock markets also struggled, with Tokyo, Hong Kong, Shanghai, Sydney, Seoul, Manila and Jakarta all down. There were gains in Singapore, Wellington and Taipei.
The dollar, seen as a safe haven during the crisis, rose against its peers.
However, equity traders remain relatively upbeat thanks to a revival of the AI trade, which has helped push Seoul's Kospi index to multiple record highs.
The country's Samsung Electronics reported a 750 percent surge in operating profit to a record high on Thursday, thanks to strong sales of chips crucial for artificial intelligence, while it also forecast healthy demand in the next three months.
That came after Microsoft, Meta and Google-parent Alphabet posted forecast-busting earnings.
US stock futures rose.
SPI Asset Management's Stephen Innes warned that the positive mood on stock markets could change.
"History tells us that this widening divide between stocks, oil, and rates can only stretch so far before the physical shock bleeds into the real economy," he wrote.
"Expensive energy is not abstract. It moves quietly through the system, from the pump to logistics to margins, eventually surfacing in the data that central banks respond to after the fact."
Investors were also assessing the outlook for the Federal Reserve's policy actions after four members of its decision-making body dissented on a vote, the most since 1992.
While it voted to hold interest rates owing to fears of a spike in inflation caused by surging energy costs, three "did not support inclusion of an easing bias in the statement at this time."
A fourth voting member, Trump-appointee Stephen Miran, had sought a quarter-point cut.
The meeting was the last with Jerome Powell as Fed boss, with Kevin Warsh -- the president's pick -- to take over next month.
Trump spent much of his second term blasting Powell for not cutting borrowing costs quickly enough.
Key figures at 0300 GMT
West Texas Intermediate: UP 1.9 percent at $108.92 a barrel
Brent North Sea Crude: UP 2.9 percent at $121.48 a barrel
Tokyo - Nikkei 225: DOWN 1.0 percent at 59,304.62 (break)
Hong Kong - Hang Seng Index: DOWN 1.3 percent at 25,763.07
Shanghai - Composite: DOWN 0.1 percent at 4,104.67
Euro/dollar: DOWN at $1.1668 from $1.1695 on Wednesday
Pound/dollar: DOWN at $1.3476 from $1.3489
Dollar/yen: UP at 160.34 yen from 160.23 yen
Euro/pound: DOWN at 86.58 pence from 86.71 pence
New York - Dow: DOWN 0.6 percent at 48,861.81 (close)
London - FTSE 100: DOWN 1.2 percent at 10,213.11 (close)
