Oil prices spiked in early Asian trade on Monday after President Trump unequivocally rejected Iran’s response to a U.S.-drafted peace proposal.
At the time of writing, Brent crude was up 3.33%, trading at $104.60 per barrel, while West Texas Intermediate had risen to $98.62 per barrel, up 3.35%.
The spike followed a social media post from Trump on Sunday evening in which he described Iran’s response to the proposal as “totally unacceptable”.
The President did not disclose details of Iran’s response, but he has repeatedly warned that if an agreement is not reached quickly, then renewed military escalation would be the next step.
The Iranian proposal, which was submitted on Sunday morning, reportedly called for an immediate end to the war on all fronts, Iran’s management of the Strait, and an end to the U.S. blockade on Iranian exports. U.S. allies in the region have made it clear that Iranian control of the Strait, or any sort of toll, would be entirely unacceptable as an outcome.
In a social media post several hours before his rejection of the deal, President Trump had accused Iran of ‘playing games’ with the U.S. by using delay tactics, suggesting his patience with the peace talks may be wearing thin.
Markets will now be focusing on Trump’s visit to Beijing on Wednesday, where discussions are sure to include Iran and whether Beijing will use its influence over the country to somehow reopen the Strait of Hormuz.
Oil prices remain significantly below last week’s levels when reports of a potential peace deal first broke, and while there is plenty of upside risk if talks completely break down, hopes of a Chinese intervention should cap gains in the short term.
By Josh Owens for Oilprice.com
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