Oil prices surged on Monday after US President Donald Trump rejected Iran’s response to a proposed peace deal, deepening uncertainty over the 10-week conflict and raising fears of prolonged disruption to global shipping routes through the Strait of Hormuz.
The diplomatic standoff escalated after Iran submitted its counter-proposal on Sunday, calling for an end to hostilities across multiple fronts, including Lebanon, where Israeli forces continue fighting Iran-backed Hezbollah.
Tehran’s response also demanded compensation for war damages, the lifting of US sanctions, the unfreezing of Iranian assets, and an end to restrictions on Iranian oil exports. It further insisted on recognition of Iranian sovereignty over the Strait of Hormuz and the withdrawal of what it described as a US naval blockade.
However, within hours, Trump dismissed the proposal on social media, writing on Truth Social that it was “TOTALLY UNACCEPTABLE,” without providing further details.
The US had earlier proposed a phased approach, beginning with a ceasefire followed by negotiations covering more contentious issues, including Iran’s nuclear programme.
Following Trump’s rejection, Iranian officials defended their stance, describing their proposal as “generous and responsible” and reiterating demands for an end to the conflict and what they called “economic pressure and piracy”.
Oil markets reacted sharply to the deadlock, with prices jumping more than 3.5% as concerns grew over continued instability in the Strait of Hormuz, a critical global energy chokepoint that previously handled around one-fifth of global oil and liquefied natural gas shipments before the conflict.
Shipping activity through the strait has significantly reduced since fighting escalated, although reports indicated that several crude-laden tankers managed to pass through in recent days with tracking systems switched off due to security risks.
Regional tensions have also remained high, with sporadic incidents reported near key maritime routes and neighbouring airspaces, further complicating already fragile ceasefire conditions in parts of the wider conflict zone.
Despite ongoing diplomatic efforts, uncertainty remains over the next phase of negotiations, while global leaders continue to warn that prolonged instability could further strain energy markets and international trade flows.
