Trump rejects Iran’s Hormuz plan and oil prices climb

President Donald Trump rejected an Iranian proposal to reopen the Strait of Hormuz and end the fighting, and oil prices rose in response^1,3. Crude jumped more than 4 per cent on Monday after the rejection became public³. Prices rose further as Iran said it would not soften the conditions it has attached to reopening the waterway². The United States has imposed an economic blockade on Iran to pressure Tehran into halting attacks on vessels in the strait, attacks that had sharply disrupted traffic⁴.

US Ambassador to the United Nations Mike Waltz said the proposal was turned down because Tehran demanded billions in frozen assets up front⁶. Speaking on CNN’s State of the Union, Waltz called the offer a cynical bid for upfront concessions⁷. France 24 reported the rejected package was framed as a seven-day truce¹¹. Iran said it was still awaiting a definitive US response despite the rejection⁵, and insisted that a diplomatic solution remained possible⁹.

Why it matters to investors

The waterway is the single largest artery in the oil trade. Energy Secretary Chris Wright said flows through the Strait of Hormuz were averaging almost 13 million barrels a day¹³. US Central Command said more than a billion barrels have passed through the strait in recent months¹⁴.

With the passage contested and no truce in place, the energy premium that has been feeding inflation forecasts across developed markets stays where it is¹⁰. The dollar rose as oil gained¹². Semafor reported that hope for a US and Iran truce is fading, and that the administration has been issuing ultimatums to Tehran’s trading partners, warning that continued commerce risks US sanctions¹⁰.

What to watch

Trump told Axios he expects US negotiators to engage in more talks with Iran this week⁸. Qatar and other regional mediators are trying to revive negotiations, but the two sides remain far apart on the central issues: Iran wants any talks to focus on the strait and the naval blockade, while the administration is demanding nuclear concessions⁸.

Trump has also raised the possibility of renewed air strikes on Iran even as he anticipates further talks¹¹. Tehran’s position is that the reopening terms stand^2,5. For markets, the question is whether the next round of indirect dialogue narrows the gap, or whether the blockade and the counter-attacks on shipping settle into a longer standoff^4,8. Reuters reported that Tehran continues to insist on a diplomatic solution even after the rejection⁹.