Trump Rejects Iran Truce Offer, Oil Prices Jump
Oil prices jumped on Monday after US President Donald Trump rejected an Iranian offer to reopen the Strait of Hormuz, reviving inflation concerns.
Tehran had set out a plan for a seven-day truce that would see the strait reopened, easing a crippling supply crisis that has driven up costs worldwide. The waterway is key to world energy supplies and central to the conflict between the US and Iran.
'I reject their proposal,' Trump told reporters outside the White House on Sunday. However, he added that he expects negotiations to resume. 'They want to make a deal, but it's not the deal that I want to make,' he said in an interview with Axios published on Sunday. 'It is what we would have maybe agreed to a year ago. They overplayed their hand.'
Oil prices had fallen more than 2% on Friday after news of the offer, but bounced back at the start of the week. Brent North Sea crude rose 1.8% to $106.19 per barrel and West Texas Intermediate gained 1.0% to $93.34.
The rise in prices weighed on stock markets, with Seoul falling more than 2% as it reopened after a long holiday. However, Hong Kong, Sydney, Singapore, and Wellington gained. Bond yields climbed, with the average yield on a gauge of world bonds topping 4% last week for the first time since 2007.
Stephen Innes at Quintex Intel noted that 'Middle East tensions have flared again after President Donald Trump rejected Iran's latest proposal to reopen the Strait of Hormuz.' He added, 'The market is still pricing some probability that everyone eventually finds their way back to the table, even if they continue to spend the next few weeks shouting across it first.'
The rise in prices has put focus on the US Federal Reserve, which holds its next policy meeting at the end of October. The FedWatch tool puts the chance of a second straight interest rate hike at more than 65%.