Gulf Escalation Threatens Ceasefire as U.S. Seizes Iranian Vessel

European equity indices are expected to open lower on Monday as geopolitical tensions between the United States and Iran intensify, threatening to collapse a fragile ceasefire. The volatility follows a weekend of military escalation in the Gulf of Oman, where a U.S. Navy guided missile destroyer disabled and seized an Iranian-flagged cargo ship. This action comes amid a broader U.S. naval blockade of Iranian ports and follows reports of Iranian attacks on commercial vessels attempting to transit the maritime passage. The diplomatic fallout has been immediate, with Tehran calling off planned negotiations in Islamabad, citing the blockade as a breach of the existing ceasefire. Market data from IG indicates a broad decline across the continent. Germany's DAX is projected to drop 1.1%, while France's CAC 40 and Italy's FTSE MIB are both expected to fall by 1%. The U.K.'s FTSE 100 is seen opening 0.34% lower. President Donald Trump has further escalated the rhetoric, warning of potential strikes against Iranian power plants and bridges if Washington's terms for ending the conflict are not met. The current ceasefire is set to expire later this week. While Asia-Pacific markets remained mostly positive overnight, U.S. futures have turned lower. The renewed instability in the Strait of Hormuz—a critical artery for global energy supplies—threatens to reverse recent gains seen in the S&P 500 and Nasdaq Composite, both of which hit all-time highs last week.