Oil jumps after Trump rejects Iran peace terms, stoking Middle East war fears

Quick take

US President Donald Trump said on Sunday that he had read Iran’s response and found it “TOTALLY UNACCEPTABLE!” in a post on his Truth Social platform. Markets reacted to the diplomatic impasse: Brent crude rose 2.69 percent to $104.01 a barrel on July delivery.

Positions from Washington, Tehran and Jerusalem

Trump offered no details about Iran’s counterproposal in his post. Iran’s reply, delivered to Washington via Pakistani mediators according to reporting, reportedly focused on ending the war “on all fronts, especially Lebanon,” and on “ensuring shipping security.” The response contained little detail in public accounts.

Israeli Prime Minister Benjamin Netanyahu, whose forces have been involved in the conflict since February 28, said the war was not over until Iran’s enriched uranium was removed and nuclear facilities dismantled. In an interview aired Sunday he said:

“It’s not over, because there’s still nuclear material – enriched uranium – that has to be taken out of Iran. There’s still enrichment sites that have to be dismantled.”

Iran’s president, Masoud Pezeshkian, reiterated Tehran’s stance on the issue in a post on X:

“We will never bow down to the enemy, and if there is talk of dialogue or negotiation, it does not mean surrender or retreat.”

Security and shipping threats

Earlier in the war Iran imposed a blockade on the Strait of Hormuz, a vital shipping route, and established a payment mechanism to extract tolls from ships crossing the strait. US officials have said it would be unacceptable for Tehran to control the waterway, which carries a significant share of the world’s oil and other vital materials.

The US Navy has been blockading Iranian ports and at times disabling or diverting ships to and from them. Britain and France have been preparing plans for a security effort to restore trade flows through the strait, with both countries sending vessels to the region in advance and hosting a multinational defense ministers’ meeting involving more than 40 nations.

Iran warned that Britain and France would face a “decisive and immediate response” if they deployed ships to the strait. Deputy Foreign Minister Kazem Gharibabadi posted on X that “Only the Islamic Republic of Iran can establish security in this strait and it will not allow any country to interfere in such matters.”

Ceasefire strain and recent attacks

Fresh drone attacks on Sunday further rattled the fragile ceasefire. The United Arab Emirates said its “air defence systems successfully engaged two UAVs launched from Iran,” while Kuwait reported an attempted attack and Qatar said a freighter arriving from Abu Dhabi was hit by a drone. Iran’s Fars news agency reported that the struck bulk carrier was sailing under a US flag.

Reflecting rising tensions, a spokesman for the Iranian parliament’s national security commission warned Washington on social media that “Our restraint is over as of today,” adding that “Any attack on our vessels will trigger a strong and decisive Iranian response against American ships and bases.”

Market implications

The diplomatic breakdown and renewed hostilities in the Gulf pushed energy markets higher at the open, with traders reacting to the increased risk of disruption to oil flows through the Strait of Hormuz.

Brent crude’s jump to $104.01 a barrel on July delivery underlined immediate market sensitivity to developments in the region.