An open confrontation in the Strait of Hormuz on Monday severely imperilled a fragile ceasefire in Gulf region, as US and Iranian forces exchanged fire, triggering attacks on shipping and regional oil infrastructure, and raising fears of wider escalation already rippling through global energy markets.

The attacks follow US President Donald Trump’s announcement of a new initiative to reopen the Strait of Hormuz. However, Iranian and US accounts of the latest clashes diverge sharply, with both sides accusing each other of provocation while claiming operational success.

According to US Central Command (CENTCOM), American forces “blew up” six Iranian boats after Tehran launched multiple cruise missiles, drones and small boat attacks targeting US Navy vessels and commercial shipping passing through the strategic waterway.

US officials said the response came after Iranian forces escalated attacks on merchant vessels, with CENTCOM chief Admiral Brad Cooper confirming that US Apache and Seahawk helicopters struck Iranian small craft “threatening commercial shipping”.

The CENTCOM chief also stated that US forces “effectively engaged” incoming missiles and drones directed at both naval and civilian targets. Iran, however, outright rejected the claim that its boats were destroyed.

Earlier, the US reported that two American-flagged merchant ships had successfully transited the critical waterway as part of a new safeguarding initiative. But Iranian Revolutionary Guard-linked statements insisted that no commercial vessels had crossed the Strait in the reported timeframe.

“We warn that any foreign military force – especially the aggressive US military – that intends to approach or enter the Strait of Hormuz will be targeted,” Maj-Gen Ali Abdollahi told state broadcaster IRIB on Monday.

President Trump defended the US operation under what he has termed “Project Freedom”, aimed at securing maritime movement through the Strait of Hormuz. He said the US forces were guiding ships safely through the waterway and claimed Iranian actions had resulted in limited damage.

Trump later escalated his rhetoric, warning Iranian forces they would be “blown off the face of the Earth” if US ships were targeted, while also insisting Tehran’s negotiators were showing signs of flexibility in ongoing diplomatic contacts.

He maintained that US forces had shot down Iranian boats and intercepted missiles and drones, though figures on destroyed assets vary between official statements. He also urged South Korea to join the mission after one of its vessels was reportedly affected in the Strait.

Elsewhere in the region, the United Arab Emirates (UAE) and Oman have also been drawn into the widening crisis. The UAE reported a drone strike that triggered a fire at an oil installation in Fujairah, while British maritime sources confirmed vessels ablaze off the Emirati coast.

Authorities in Fujairah said an Iranian drone sparked the fire at a key oil facility, wounding three Indian nationals. Admiral Cooper said the Fujairah attack was “under their national jurisdiction” and not part of the new American effort to restore commercial shipping through the Strait.

“Four cruise missiles launched from Iran were detected toward various areas across the country. Three were successfully engaged over the country’s territorial waters, while one fell in the sea,” the UAE defence ministry said on X.

The ministry affirmed that the sounds heard in different parts of the country are a result of air defence systems engaging threats. The education ministry announced that distance learning at educational institutions had been reintroduced for this week.

Throughout Monday, airspace over the UAE was largely cleared as the country faced multiple drone alerts, according to FlightRadar24. The UAE described the attacks as a “dangerous escalation” and said it reserved the right to respond.

A CNN report claimed that Israeli Iron Dome air defence system, operated by Israeli personnel and deployed in the UAE, was involved in intercepting Iranian missiles. The Israeli military said it is closely monitoring developments and remains on high alert.

Authorities in Oman reported injuries after a residential building in Bukha was struck, underscoring the geographical spread of the conflict beyond the Strait itself. The defence ministry said in a statement on X that the building housed workers of a company.

Two foreign nationals were moderately injured, four vehicles were damaged and windows in a nearby house were shattered, the ministry stated. Authorities did not say whether the incident was the result of an attack or identify its source, adding that an investigation is under way.

The economic impact has been immediate and severe. Oil prices surged more than 5%, with Brent crude jumping sharply amid fears that the Strait of Hormuz – through which roughly one-fifth of global oil and liquefied natural gas flows – could remain disrupted for an extended period.

Global equity markets also slipped as energy shock fears intensified. US stocks declined across major indices, while European markets fell sharply on renewed geopolitical risk and tariff concerns. Currency markets saw volatility, particularly in the yen.

The aviation sector has been significantly disrupted, with airlines across Europe, Asia and the Middle East cancelling or rerouting flights. Carriers including Air France-KLM, Lufthansa Group, Qatar Airways, Emirates, Air Canada and multiple low-cost operators have suspended services to key Gulf destinations.

Turkey has warned that the global community should prepare for a prolonged energy crisis linked to the conflict, citing uncertainties around the Strait and wider regional supply routes. Officials in Ankara said global markets could face sustained pressure if disruption continues.