President Donald Trump said the U.S. Navy fired upon and seized an Iranian-flagged cargo ship in the Gulf of Oman after it failed to heed warnings to stop as it left the Strait of Hormuz, the first major encounter in the week-old blockade.

“Today, an Iranian-flagged cargo ship named TOUSKA, nearly 900 feet long and weighing almost as much as an aircraft carrier, tried to get past our Naval Blockade, and it did not go well for them,” Trump said in a social media post.

He said a U.S. guided missile destroyer warned the vessel to stop, and when it didn’t, “our Navy ship stopped them right in their tracks by blowing a hole in the engineroom.” Trump said the ship has been under the Treasury Department’s sanctions and that the U.S. now has possession of it.

The incident came hours after a back-and-forth over potential peace talks in Islamabad this week, with Trump saying he saw a chance for a deal and Iranians saying there was no “clear prospect” for an agreement. The current ceasefire is scheduled to end on Tuesday.

“We’re offering a very fair and reasonable DEAL, and I hope they take it because, if they don’t, the United States is going to knock out every single Power Plant, and every single Bridge, in Iran,” Trump said in a social media post earlier on Sunday. “NO MORE MR. NICE GUY!”

Vice President JD Vance, special envoy Steve Witkoff and the president’s son-in-law Jared Kushner are scheduled to leave for Islamabad Monday night for talks on Tuesday, a White House official said.

But Iranian state TV cited a member of the country’s negotiating team as saying, “We do not envision a clear prospect for ‘productive’ Iran-U.S. negotiations,” and denied any plan to participate in this week’s planned talks.

“U.S. overreach, unreasonable and unrealistic demands, frequent changes in positions, continuous contradictions, and the continuation of the so-called naval blockade, which is considered a violation of the ceasefire agreement, along with threatening rhetoric, have so far hindered the progress of the negotiations, and under these circumstances, a clear prospect for productive negotiations is not envisioned,” the report on IRIB said.

Meanwhile, Iran, which closed the strait last week after opening it amid the ceasefire, set out new fee rules and said the parliament was working to pass a law to manage the Strait of Hormuz, including prohibiting ships affiliated with Israel and that ships from “hostile countries” would not be allowed to pass without permission from the Supreme National Security Council.

The White House did not immediately respond to a question seeking comment on the Iranian statement.

The standoff over Hormuz — through which about a fifth of the world’s oil and liquefied natural gas flowed before the U.S.-Israeli war on Iran began — threatens to deepen the global energy crisis and is undermining Trump’s weekend prediction of a quick end to the war.

The waterway is just one of the unresolved issues, which also include Iran’s nuclear capabilities and Israel’s ongoing invasion of Lebanon. Trump has said Iran has agreed to end its nuclear program, but Iran has disputed that.

“Ships are awaiting instructions from Iran’s armed forces to determine whether they can pass through the route,” Iran’s semi-official Mehr news agency reported on Sunday.

The situation was shifting rapidly. Late Saturday, Iran’s Parliament Speaker Mohammad Bagher Ghalibaf — who led the Iranian delegation in talks with the U.S. earlier this month in Pakistan — said that while gaps “remain significant,” the negotiations are making progress.

The U.S. naval blockade is allowing ships carrying non-Iranian cargo to depart the Persian Gulf but not any ships that left Iranian ports, which led to the Islamic Republic re-closing the strait.

“It is impossible for others to pass through the Strait of Hormuz while we cannot,” Ghalibaf said in a televised address.

The Islamic Revolutionary Guard Corps’ navy issued a statement Saturday afternoon warning vessels not to leave their anchorages in the Persian Gulf and the Sea of Oman, and that approaching the strait “will be considered cooperation with the enemy, and the violating vessel will be targeted.”

The Joint Maritime Information Center, an international group that shares information about shipping routes, reported multiple attacks by Iranian forces on vessels in the strait as well as the presence of mines and said the overall risk level was “critical.”

Whiplash

The developments of the last 72 hours illustrate the erratic nature of the war and the diplomacy around ending it, with Trump and Iran making contradictory statements within hours, Israel continuing to fight in Lebanon and the Iranians opening and closing the Strait of Hormuz.

Trump on Friday said a deal with Iran was all but agreed to, including concessions Tehran has never publicly made, signaling he was ready to sign and move on to domestic issues. He even told ABC News that he trusted the Iranians, a group whose civilization he just recently threatened to wipe out.

There were also signs the ceasefire in Lebanon — linked to Iran’s decision to allow Hormuz traffic — may be fraying. The Israel Defense Forces said it struck “saboteurs” approaching its troops in violation of the truce, and one Israeli soldier was killed and three wounded.

Momentum for a lasting peace had been building late last week, but cracks began to emerge Saturday with Iran’s criticism of the continued U.S. blockade.

The U.K. Navy said a tanker was approached by IRGC gunboats before being fired at on Saturday, adding that the targeted vessel and its crew were safe. A container ship was hit by an unknown projectile in a separate incident off the coast of Oman, it said. And India said its ships were also fired upon.

The dollar was indicated higher against major peers as traders sought haven assets in early Asian trading Monday. The Aussie led losses among risk-sensitive currencies.

Oil, fuel and natural gas prices plunged Friday on hopes that the latest developments would mean an end to the war and more energy supplies could transit safely through Hormuz. Brent crude dropped 9% on Friday to around $90 a barrel. Diesel prices in the U.S. and Europe also fell.

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(With assistance from Valentine Baldassari, Patrick Sykes, Eltaf Najafizada, Dan Williams, Weilun Soon, Sara Gharaibeh and Omar Tamo.)

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