Oil prices rose more than 3% on Monday after US President Donald Trump rejected Iran’s response to a US-backed peace proposal, raising fears that tensions in the Middle East could continue to disrupt global energy supplies.
Brent crude futures settled near $104 a barrel, while US West Texas Intermediate crude closed around $98 a barrel after both benchmarks had fallen sharply last week on hopes that Washington and Tehran were moving closer to a diplomatic agreement.
Trump said the ceasefire between the United States and Iran was “on life support” and described Tehran’s latest proposal as “totally unacceptable,” signaling a widening gap between the two sides after weeks of negotiations.
Iran’s response reportedly called for an end to hostilities across the region, compensation for war-related damage, guarantees against future attacks, the lifting of US sanctions and recognition of Tehran’s sovereignty claims over the Strait of Hormuz.
The diplomatic setback renewed concerns about prolonged disruption in the Strait of Hormuz, the narrow shipping lane between Iran and Oman through which roughly one-fifth of global oil and liquefied natural gas flows normally pass. Shipping traffic through the waterway has remained severely constrained during the conflict, tightening global crude supplies and pushing energy prices sharply higher in recent months.
Analysts said the latest developments erased optimism that had briefly emerged after reports of possible progress in ceasefire talks. Oil markets have remained highly sensitive to any signs of escalation or de-escalation in the conflict, with crude prices swinging widely since fighting intensified earlier this year.
The rise in oil prices also added to broader market concerns about inflation and economic growth. Higher fuel costs have already lifted gasoline prices in the United States, where the national average recently climbed above $4.50 a gallon, according to AAA data cited by market reports.
Trump said his administration was considering a temporary suspension of the federal gasoline tax to ease pressure on consumers as energy prices remain elevated.
The conflict has also disrupted production and exports across the oil-producing region. A Reuters survey showed OPEC output fell further in April to its lowest level in more than two decades as export flows through the Gulf slowed and some producers cut shipments amid security concerns.
At the same time, Washington announced fresh sanctions targeting individuals and companies accused of helping Iran ship oil to China, underscoring continued US efforts to restrict Tehran’s energy revenues while negotiations remain stalled.
Investors are now watching for signs of renewed diplomacy ahead of an expected meeting between Trump and Chinese President Xi Jinping later this week. China remains one of the largest buyers of Iranian oil, and analysts say Beijing could play a critical role in any future settlement.
Energy traders and policymakers are also monitoring whether the standoff evolves into a longer-term supply shock. Some analysts expect crude prices to remain above $100 a barrel if the Strait of Hormuz remains partially blocked and diplomatic efforts continue to falter.
