US-Iran war live updates: Trump says US seized Iranian ship in Strait of Hormuz; US delegation will head to Pakistan for second round of negotiations; Tehran rejects US peace talks

Oil and natural gas prices soared after the US Navy seized an Iranian ship during a chaotic weekend that saw Tehran firing at vessels and reimposing controls in the Strait of Hormuz.

Brent jumped as much as 7.9 per cent, erasing most of its declines on Friday after a reopening of the key waterway was announced, while US oil jumped 7.2 per cent. European gas increased as much as 11 per cent. Tehran on Sunday (AEST) again closed the choke point, after it said a US blockade of Iran-linked ships violated a ceasefire agreement that ends this week.

President Donald Trump said the US Navy fired upon and seized the ship in the Gulf of Oman after it failed to heed warnings to stop as it left Hormuz, the first major encounter in the week-old blockade. The incident came hours after a back-and-forth over potential peace talks in Islamabad, with Trump saying he saw a chance for a deal and Iranians saying there was no “clear prospect” of an agreement.

“The market’s still carrying a risk premium into the deadline but just not fully committing to it,” said Haris Khurshid, chief investment officer at Karobaar Capital LP in Chicago. “If things just continue as they are, you probably see a gradual push higher to around $US105 [$147] to $US115, but with a lot of back and forth on headlines.”

The standoff over Hormuz – through which about a fifth of the world’s oil and liquefied natural gas flowed before the US-Israeli war on Iran began at the end of February – threatens to deepen the global energy crisis and is undermining Trump’s weekend prediction of a quick end to the conflict. The waterway is just one of the unresolved issues, which also include Iran’s nuclear capabilities and Israel’s ongoing invasion of Lebanon.

Bloomberg

Transport Minister Catherine King says she welcomes the prospect of another round of peace talks between the US and Iran, after Trump announced a US delegation would visit Pakistan for negotiations.

“It’s good that the US is sending Vice President JD Vance for further talks, but this is really where the best diplomatic efforts are really going to be needed to resolve this [conflict].

“It’s volatile. It’s changing daily,” she told ABC’s News Breakfast this morning.

Iran has not confirmed whether it will participate in the talks, however, Iranian state media have reported.

The United Arab Emirates has begun talks with the US about a financial backstop in case the Iran war plunges the country into further crisis, The Wall Street Journal reported, citing US officials it did not identify.

UAE Central Bank Governor Khaled Mohamed Balama raised the idea of a currency swap line with Federal Reserve and US Treasury officials, including Treasury Secretary Scott Bessent, during meetings in Washington last week, according to the report.

The Emirati leaders said they have avoided the worst economic effects of the conflict but might still need a financial lifeline, the officials told the Journal.

The discussions underscore the UAE’s growing anxiety that the war could harm its economy and position as an international financial centre, draining foreign currency reserves and triggering capital flight, according to the WSJ. Emirati officials haven’t formally requested a swap line, the Journal said.

The war has inflicted damage on the UAE’s energy infrastructure and blocked oil shipments through the Strait of Hormuz, cutting off a critical stream of dollar income.

Bloomberg

Chalmers says he expects inflation, economic growth and unemployment to worsen.

“We do expect inflation to be higher, we do expect growth to be slower, and slower growth typically, not always but typically, means higher unemployment,” he said. “That’s what we’re dealing with to be upfront with you.”

However, he said Australia’s labour market, which has remained relatively resilient with unemployment at 4.3 per cent, would put the economy in good stead as the oil shock continues to play out.

“As we work through these consequences which are already serious and could become severe, we also have some very substantial advantages,” he said. “Our labour market is a source of considerable strength which is a good foundation from which to face all of this uncertainty.”

Chalmers says the fuel excise cut will cost the federal budget about $2.5 billion, and has kept the door open to extending it, but says the government remains committed to finding savings.

“[The fuel excise cut] will be one of the bigger new spending items in the budget,” he said. [The budget] won’t be identical to what we were considering earlier in the year, but it will be ambitious. The savings package won’t be exactly the same as we might have been thinking a few months ago, but it will still be substantial.”

Chalmers said the fuel excise tax would be “temporary in one way or another”, but said all policies would remain under review.

Chalmers has also announced the release draft legislation for a $1000 instant tax deduction for workers and “updated thinking” on the superannuation performance test.

“[The tax deduction] will cut back on paperwork, it’ll save time and money, it’ll provide a bit of tax relief as well,” he said. “It will benefit 6.2 million workers when they lodge a tax return next year. The benefit is up to $470 in the tax return, and it’s about $205 on average.”

The treasurer also said that while he had “absolutely no interest” in watering down or ditching the superannuation performance test, he would release details about the options available.

“There is no consensus here on the best way forward in the discussions that we’ve been having with the sector for some time. We would prefer a consensus, if one is possible, but at the very least, the paper that I’ll be releasing with Daniel Mulino soonish will give you an updated sense of our thinking here.”

One of the most significant savings in the upcoming federal budget will be in the National Disability Insurance Scheme, Treasurer Jim Chalmers says.

Ahead of a speech by Health Minister Mark Butler at the National Press Club on Wednesday, Chalmers signalled the NDIS, which is estimated to cost about $49 billion this year, would be a centrepiece of his budget next month.

“[Butler] will provide more than the usual amount of detail in advance of the budget,” he said. “We need to make sure that [the NDIS] is sustainable, and that’s what our efforts are all about. This has been a really big part of our pre-budget deliberations. It is easily the most important part of the savings package that we will present on budget night.”