Oil prices spike after Trump rejects Iran truce offer

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Oil prices spiked with bond yields Monday as Donald Trump’s rejection of an Iranian offer of a seven-day truce stoked inflation concerns, while stocks were mixed as traders look ahead to the release of key US data.

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Tehran last week set out a plan at the UN General Assembly for a halt in hostilities that would see the Strait of Hormuz reopened, which would ease a crippling supply crisis that has jacked up costs around the world.

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The waterway is key to the world’s energy supply and is now central to the conflict between the US and Iran, particularly with Houthis seizing Yemen’s entire Red Sea coast, including the Bab al-Mandab Strait, a vital shipping lane.

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However, the US president told reporters outside the White House, “I reject their proposal.”

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Still, he told Axios that he expects negotiations to resume.

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“They want to make a deal, but it is not the deal that I want to make,” he told the news platform. “It is what we would have maybe agreed to a year ago.”

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“They overplayed their hand,” Trump added in the interview published Sunday.

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Citing sources familiar with the matter, Axios reported that indirect talks between Washington and Tehran could take place as early as Monday.

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Iran was still standing by its conditions for reopening the Strait, including the release of frozen assets, the lifting of sanctions on its oil and an end to the US naval blockade.

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Oil prices, which fell more than two per cent Friday on news of the offer, bounced back at the start of the new week, with Brent surging more than three per cent back above $107 a barrel.

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That stoked inflation concerns again, and weighed on stock markets.

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Seoul fell 2.7 per cent as it reopened after a long break, while Tokyo, Shanghai, Manila, Mumbai, Bangkok and Jakarta also dropped.

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There were gains in Hong Kong, Sydney, Singapore and Wellington, while London, Paris and Frankfurt were also on the front foot.

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Bond yields climbed, with the average on a gauge of world bonds topping four per cent last week for the first time since 2007, according to Bloomberg.

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The rise in prices puts the focus back on the Federal Reserve ahead of its next policy meeting at the end of October, with CME’s FedWatch tool putting the chances of a second successive interest rate hike at more than 65 per cent.

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Before that decision is made, investors will see the release of the bank’s preferred gauge of inflation this week as well as a key jobs report that could play a vital role in policymakers’ thinking.

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“Middle East tensions have flared again after President Donald Trump rejected Iran’s latest proposal to reopen the Strait of Hormuz,” wrote Stephen Innes at Quintex Intel.

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“Oil has pushed higher, Asian equities are softer, and suddenly the brief Friday reprieve in global fixed income looks more like an intermission than the end of the show.”

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Still, 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.”

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– Key figures at around 0810 GMT –

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West Texas Intermediate: UP 2.2 per cent at $94.50 per barrel

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Brent North Sea Crude: UP 2.5 per cent at $106.96 per barrel

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Tokyo – Nikkei 225: DOWN 0.7 per cent at 65,877.62 (close)

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Hong Kong – Hang Seng Index: UP 0.5 per cent at 24,642.51 (close)

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Shanghai – Composite: DOWN 1.7 per cent at 3,823.62 (close)

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London – FTSE 100: UP 0.4 per cent at 10,736.87

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Dollar/yen: DOWN at 156.78 yen from 157.20 yen on Friday

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Euro/dollar: DOWN at $1.1382 from $1.1399

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Pound/dollar: DOWN at $1.3266 from $1.3251

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Euro/pound: DOWN to 85.80 pence from 86.03 pence

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New York – Dow: UP 0.9 per cent to 51,828.62 (close)

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AFP

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