The fragile pact to maintain the Strait of Hormuz open unravelled once again on the weekend as the United States struck into Iran for its third attack on Iranian land since beginning the war last week, while Tehran retaliated by firing on American bases in four Gulf states. Brent crude was up more than 4 percent to reach $78.82 a barrel, its highest price since late June, with the interim deal reached in Islamabad just weeks ago now appearing to be in peril even more than when it was signed.

The immediate cause was that a container ship, MV GFS Galaxy, that was under Cyprus flag and had been hit by an Iranian drone and set ablaze in the strait, resulting in the death of one crew member and the disappearance of another. In response, U.S. Central Command fired back, targeting air-defense systems, radar stations, missile and drone facilities and small naval vessels operated by the Revolutionary Guard in an attempt to disrupt Iran's ability to pose a threat to shipping. According to Iranian state media, there were explosions in the south and west of the country, from Qeshm Island to Bandar Abbas to a water-pumping station in Mahshahr, in which at least one person lost his life and four others were injured.

Within hours Tehran retaliated. Strikes against American-backed bases in Jordan, Bahrain and Kuwait were claimed by the Revolutionary Guard, while the Americans' base in Manama, the home of the U.S. Navy's Fifth Fleet, was alerted by missile sirens at dawn. Further, Iran's foreign ministry said the renewed bombing had made the months of diplomacy worthless, and Mohammad Bagher Ghalibaf, the parliament speaker, who has become Tehran's chief negotiator, threatened that days of deals made on unequal terms were over.

President Trump, meanwhile, denied that the strait would be closed even if Iran says it is, telling NBC over the weekend that the Trump administration had dealt with Iran in a "harsh manner" the previous night. He added that Iran, a day before the attack on the container ship, had accepted a deal on the verbal level, but did not mention which deal. The net result of all that fuzz over timing, whatever it is, is a waterway that used to move 18 to 22 tankers a day is now back to single digits.

The economic impact is more significant than just the price of crude. The premiums for vessels transiting Hormuz, which were around one-quarter percent of the hull value before the opening strikes in February, have skyrocketed from 3 to 10 percent at various times this year, making a $625,000 premium more than $7 million on an average tanker on a single trip. The entire Persian Gulf continues to be on the high-risk list of Lloyd's Market Association's Joint War Committee, and Washington has had to rely on its own Development Finance Corporation to fill in any gaps in coverage, an unusual assignment for the organisation that was established to support infrastructure loans in less developed economies rather than to underwrite a live war zone. Markets in Asia took the hit unevenly Monday, with losses being deeper in Tokyo and Seoul, but gains in Taipei and Hong Kong, while US futures waned, led by losses at chipmakers.

The odds are not equal. Meanwhile, China, which imports about 40 percent of its crude through Hormuz, has also been quietly signaling to the world that its energy lifeline through the Strait of Malacca to China's South China Sea may be similarly affected by a Taiwan contingency, which it has feared since it was forced to drop its previous direct reference to the matter with Washington. Gulf producers with other oil routes are cushioned, with Saudi Arabia's East-West pipeline around the chokepoint to the Red Sea and the UAE's Fujairah tube to the UAE having kept them fairly secure, while Iraq, Kuwait and Qatar have suffered a sustained decline in income since the war started in February. The fertilizer market, too, has been affected the Gulf region provides nearly one-third of world fertilizer trade, and a large portion of that relies on the same shipping routes beset by mines, missile threats and ambiguous transit rules.

Diplomatically, it's not much more complicated. Pakistan, which had originally mediated the memorandum, sought again for de-escalation over the weekend, with Foreign Minister Ishaq Dar pointing out that dialogue is the sole path towards resolving the dispute. The United Nations' Secretary-General, António Guterres, said that a return to war would have "consequences that the area and the global economy cannot afford. But the central issue that sparked this weekend's violence was not resolved by the April ceasefire or the Islamabad memorandum that followed: whether Hormuz is truly international water as Washington claims or a route that Iran can control, toll and police as it pleases in a claim that has grown in confidence for Tehran since the war began.

Interestingly, Israel has been absent from this latest round altogether, a pointer that could indicate that Jerusalem was not involved in the US-Iran pact, and therefore is not bound by its terms. Which means that Washington is left to negotiate with an Iranian government that has, rightly or wrongly, determined that it can leverage the control of the world's most valuable chokepoint to which no ceasefire can ever be applied. For now, markets are reflecting just that uncertainty and shippers are simply not interested in discovering the hard way.