Oil prices climbed on Monday after US President Donald Trump dismissed Iran's response to American proposals aimed at ending the ongoing war in the Middle East, calling it 'totally unacceptable'. The rejection triggered a sharp increase in Brent crude, the international benchmark for oil, which surged by as much as 4% to $105.50 per barrel before easing back to settle at $103.50.
Trump's Rejection and Iran's Counter-Proposal
The United States had presented a peace proposal a week ago, reportedly consisting of a 14-point memorandum of understanding. This plan aimed to reopen the strategically vital Strait of Hormuz while setting a framework for further negotiations on Iran's nuclear programme. In response, Iran submitted a counter-proposal that allegedly suggested a shorter moratorium and refused to accept the dismantling of its nuclear facilities.
In a post on his Truth Social platform on Sunday evening, Trump stated: 'I have just read the response from Iran's so-called "representatives". I don't like it – totally unacceptable.' This statement heightened tensions and added to fears that oil prices could remain elevated for an extended period.
Impact on Global Markets and Supply Concerns
The escalation has exacerbated concerns over global oil supplies, particularly as the Strait of Hormuz — through which approximately one-fifth of the world's oil and gas supply normally passes — remains effectively closed due to the conflict. Susannah Streeter, chief investment strategist at the broker Wealth Club, commented: 'While there is some expectation that a major reignition of the war is less likely, given the US claims a ceasefire is still in place, severe supply constraints of commodities are set to continue. With the crisis now into its 11th week, consumers, companies, and countries are having to adapt to a world of constrained supplies.'
In the UK, the cost of government borrowing also rose amid fears of higher inflation, which could make it harder for central banks to cut interest rates. Uncertainty over Prime Minister Keir Starmer's leadership following local election results added to the volatility. The yield on 30-year gilts rose by as much as 7 basis points on Monday morning to 5.64%, while the yield on 10-year gilts increased by 5 basis points to 4.96%.
European and Asian Stock Market Reactions
European stock markets showed mixed results. The blue-chip FTSE 100 index opened slightly higher, up 0.2%, with oil companies BP and Shell among the top risers. However, the French CAC 40 slipped by 0.5%, and the German Dax dropped 0.9%. In Asia, markets were also mixed: Japan's Nikkei fell 0.4%, Hong Kong's Hang Seng declined 0.3%, while the Shanghai Composite index rose by about 1% after official data showed China's factory gate prices increased 2.8% in April compared with the same period last year. The South Korean Kospi index surged 4.3%, boosted by gains in tech giant Samsung Electronics.
Upcoming US-China Summit
President Trump is scheduled to meet Chinese President Xi Jinping in Beijing this week. The two leaders are expected to discuss trade, Taiwan, and China's role in the Middle East conflict. This visit marks the first time a US president has traveled to China in nearly a decade; the last such visit was also by Trump during his first term in 2017.
