West Texas Intermediate (WTI) Oil experienced strong gains on Monday, with prices trading around $94.70, up 3.18% on the day, following a significant bullish gap at the start of the week [1]. The rally was triggered by US President Donald Trump's rejection of Iran's latest peace proposal, which he described as 'totally unacceptable' [1][2]. This development diminished hopes for a swift ceasefire and the reopening of the Strait of Hormuz, a critical passage for nearly 20% of the world's oil supply [1][2].
Iranian state media reported that Tehran is demanding financial compensation for war damages, the lifting of sanctions, and recognition of its authority around the Strait of Hormuz [1]. Regional tensions remain high, with Iran accusing the US of attacks on oil tankers over the weekend and Israeli Prime Minister Benjamin Netanyahu stating that the conflict would not end until Iran's enriched uranium is eliminated—a condition Tehran rejects [1].
Societe Generale analysts noted that even if the Strait of Hormuz were to reopen, normalization of oil flows and shipping traffic could take several weeks, maintaining tightness in the physical crude market [1]. Meanwhile, improving Chinese trade data released on Monday supported oil prices by fueling expectations of stronger energy demand in the coming months [1]. However, the prospect of a prolonged restrictive monetary policy stance from the Federal Reserve, due to strong US labor market data, could limit oil's upside potential by restraining consumption and fuel demand [1].
In related policy news, Reuters reported that Trump is considering a temporary suspension of the 18-cent federal gasoline tax to help ease consumer pressure amid high fuel prices [1]. On the currency front, the Australian Dollar surged toward the 0.7260 region, buoyed by improving demand for commodity-linked currencies and the renewed geopolitical tensions following Trump's rejection of the Iran deal [2]. Oil price gains have increased fears of renewed inflationary pressure, keeping markets cautious as investors await the upcoming US Consumer Price Index (CPI) report for further signals on inflation and Federal Reserve policy direction [2].
CONCLUSION
Trump's rejection of Iran's peace proposal has reignited geopolitical tensions and supply concerns, driving WTI oil prices sharply higher. The market remains on edge over potential disruptions in the Strait of Hormuz and the broader inflationary impact, with analysts warning that any normalization in oil flows could take weeks even if a resolution is reached. Investors are closely watching upcoming US inflation data and Federal Reserve policy signals for further market direction.