President Donald Trump’s swift rejection of Iran’s response to a U.S. peace proposal sent oil prices sharply higher Monday, as markets grew increasingly concerned that the 10-week-old conflict could drag on and keep shipping through the Strait of Hormuz disrupted.
Just days after Washington floated an offer aimed at restarting negotiations, Iran on Sunday issued a counterproposal focused on ending hostilities across all fronts, particularly in Lebanon, where U.S. ally Israel is fighting Hezbollah.
According to Iranian state media, Tehran also demanded compensation for wartime damage and reaffirmed its claim of sovereignty over the Strait of Hormuz.
The proposal further called for an end to a U.S. naval blockade, guarantees against future strikes, the lifting of sanctions and the removal of restrictions on Iranian oil exports, the semi-official Tasnim news agency reported.
Within hours, Trump dismissed the proposal in a social media post.
“I don’t like it. TOTALLY UNACCEPTABLE,” Trump wrote on Truth Social, without giving further detail. The U.S. had proposed an end to fighting before starting talks on more contentious issues, including Iran’s nuclear program.
Oil prices jumped more than $4 a barrel Monday following news of the continued stalemate that has left the Strait of Hormuz heavily disrupted.
Before the war began Feb. 28, the waterway carried about one-fifth of global oil and liquefied natural gas flows and has emerged as a central pressure point in the conflict.
“The oil market continues to trade like a geopolitical headline machine, with prices swinging sharply based on every comment, rejection or warning coming from Washington and Tehran,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.
While traffic through the Strait of Hormuz is a fraction of prewar levels, shipping data from Kpler and LSEG show three tankers carrying crude oil exited the waterway last week, with trackers switched off to avoid Iranian attack.
Surveys indicate the war is unpopular with U.S. voters facing higher gasoline prices less than six months before nationwide elections that will determine whether Trump’s Republican Party retains control of Congress.
The U.S. has also found limited international support, with NATO allies rejecting calls to send ships to secure the Strait of Hormuz without a full peace deal and an internationally mandated mission.
It remains unclear what diplomatic or military steps may come next.
Trump is expected to arrive in Beijing on Wednesday.
With pressure mounting to contain the war and the global energy shock it has triggered, Iran is among the topics Trump and Chinese President Xi Jinping are set to discuss.
Trump has been leaning on China to use its influence to push Tehran toward a deal with Washington.
Addressing whether combat operations against Iran were over, Trump said in remarks aired Sunday: “They are defeated, but that doesn’t mean they’re done.”
Israeli Prime Minister Benjamin Netanyahu said the war was not over because there was “more work to be done” to remove enriched uranium from Iran, dismantle enrichment sites and address Iran’s proxies and ballistic missile capabilities.
The best way to remove the enriched uranium would be through diplomacy, Netanyahu said in an interview aired Sunday on CBS News’ “60 Minutes,” though he did not rule out the use of force.
Iranian President Masoud Pezeshkian said in a social media post that Iran would “never bow down to the enemy” and would “defend national interests with strength.”
Despite diplomatic efforts to break the deadlock, risks to shipping lanes and regional economies remain high. Recent days have seen some of the most significant flare-ups around the Strait of Hormuz since a ceasefire began in early April.
On Sunday, the United Arab Emirates said it intercepted two drones coming from Iran, while Qatar condemned a drone attack that struck a cargo ship from Abu Dhabi in its waters. Kuwait said its air defenses intercepted hostile drones that entered its airspace.
Clashes have also continued in southern Lebanon between Israel and Hezbollah, despite a U.S.-brokered ceasefire announced April 16.
An end to hostilities with Iran would not necessarily end the war in Lebanon, Netanyahu said in the “60 Minutes” interview. He also said Israeli planners had underestimated Iran’s ability to threaten traffic through the Strait of Hormuz.
“It took a while for them to understand how big that risk is, which they understand now,” he said.
