Oil prices experienced a sharp surge on Monday as Middle East tensions intensified and the strategically crucial Strait of Hormuz continues to remain shut, with disruptions now crossing 70 days. According to latest reports from Reuters, Brent crude futures climbed $3.18 or 3.14% to $104.47 a barrel by 2336 GMT, while US benchmark West Texas Intermediate (WTI) rose $3.09 or 3.24% to $98.51 per barrel. The rally came as hopes of an imminent end to the 10-week-long US-Iran conflict faded amid escalating regional tensions, with prices remaining significantly below last week's levels when reports of a potential peace deal first broke. Oil prices surged approximately 3-5% following Trump's rejection of Iran's peace proposal, with the Strait of Hormuz remaining the key variable that could trigger a supply shock of significant magnitude.
The price surge was triggered by US President Donald Trump's rejection of Tehran's response to Washington's peace proposal on Sunday, posting 'TOTALLY UNACCEPTABLE' on Truth Social. As reported by Reuters, Trump dismissed the Iranian response to the US-backed peace proposal as 'unacceptable' on Sunday evening, effectively dampening expectations of breakthrough talks that could have restored stability to oil flows through the strategic Strait of Hormuz. The President went further than just rejecting the proposal, threatening renewed bombing campaigns if Iran fails to comply with US demands. In a social media post several hours before his rejection, President Trump had accused Iran of 'playing games' with the US by using delay tactics, suggesting his patience with the peace talks may be wearing thin.
The Iranian proposal, which was submitted on Sunday morning through Pakistani mediators, offered to end hostilities across multiple fronts, including Lebanon. According to Oilprice.com, the proposal reportedly called for an immediate end to the war on all fronts, Iran's management of the Strait, and an end to the US blockade on Iranian exports. However, the problem from Washington's perspective is what the proposal didn't include. The US had laid out a clear set of demands: a complete halt to nuclear enrichment, an end to sanctions, and the reopening of the Strait of Hormuz. Iran's offer sidestepped the nuclear question almost entirely, declining a full rollback of its enrichment program, which has been a key sticking point in negotiations.
The Middle East conflict has continued to intensify, with Iran issuing fresh threats of violence in the Strait of Hormuz and both the US and Iran conducting limited military strikes against each other. According to Reuters, another two tankers laden with crude exited the Strait of Hormuz last week with trackers switched off to avoid Iranian attacks, underscoring a rising trend to sustain Middle East oil exports. Markets are now focusing on Trump's upcoming visit to Beijing on Wednesday, where discussions are sure to include Iran and whether Beijing will use its influence over the country to somehow reopen the Strait of Hormuz. Market attention now shifts squarely to President Trump's visit to China this week, as noted by IG market analyst Tony Sycamore, with hopes that he can persuade Beijing to leverage its influence over Iran to push for a comprehensive ceasefire and resolution to the ongoing disruption in the Strait of Hormuz.
