Markets brace for renewed inflation pressure as hopes of a quick reopening of the Strait of Hormuz fade, despite signs that Washington and Tehran could return to negotiations……
Oil prices climbed back above $106 a barrel on Monday after U.S. President Donald Trump rejected Iran’s proposal for a seven-day truce, reviving concerns that the conflict could continue to disrupt global energy supplies.
Brent crude rose more than two per cent in early trading, while U.S. West Texas Intermediate also gained, reversing part of last week’s decline triggered by hopes that Tehran’s proposal could pave the way for a diplomatic breakthrough.
The latest market move followed Trump’s rejection of Iran’s offer to temporarily halt hostilities and reopen the strategically important Strait of Hormuz.
Iran had presented the proposal during the United Nations General Assembly, offering a framework that could lead to the reopening of the waterway within seven days and the resumption of negotiations.
The Strait of Hormuz remains at the centre of the energy crisis because of its importance to global oil shipments. Disruptions in the waterway have already contributed to higher energy and transportation costs, raising concerns about their impact on inflation.
Trump, speaking to reporters outside the White House, dismissed Tehran’s proposal, saying, “I reject their proposal.”
However, the U.S. president indicated that the door to negotiations had not been completely closed.
In an interview, Trump said Iran wanted a deal but that the terms being offered were not acceptable to Washington.
“They want to make a deal, but it is not the deal that I want to make,” he said, adding that Tehran had “overplayed their hand.”
Despite the rejection, reports indicate that indirect contacts between the two sides could resume, keeping alive the possibility of further diplomatic efforts to resolve the standoff.
Iran, meanwhile, has maintained that the reopening of the Strait of Hormuz depends on specific conditions being met. These include easing the U.S. military pressure, lifting restrictions on Iranian oil exports and ending the naval blockade on Iranian ports.
Iranian Foreign Minister Abbas Araghchi has insisted that diplomacy remains the route to resolving the deadlock, while maintaining Tehran’s conditions for reopening the waterway.
The uncertainty immediately spilled into financial markets.
Brent crude was trading above $106 a barrel on Monday, while West Texas Intermediate also moved higher. Reuters reported Brent at $106.14 a barrel and WTI at $93.55 as of Monday evening, reflecting renewed concern over the supply outlook.
The rebound in crude prices has also brought inflation back into focus for investors.
Asian stocks were mixed, with some markets recording losses as traders assessed the implications of prolonged tensions in the Middle East. Bond yields also moved higher, reflecting renewed concern that elevated energy costs could make it harder for central banks to bring inflation under control.
For investors, attention is now shifting to a series of key U.S. economic figures due later in the week.
Fresh inflation data and the latest employment figures are expected to provide clues about the direction of U.S. monetary policy and whether rising energy costs could complicate the Federal Reserve’s next decisions on interest rates.
The oil market is therefore facing two competing forces: the possibility of renewed diplomacy between Washington and Tehran and the continued threat of disruption around one of the world’s most important energy routes.
For now, the uncertainty is keeping traders on edge, with any indication of progress in talks likely to influence oil prices, financial markets and inflation expectations in the days ahead.
