Oil prices rallied on Monday after President Donald Trump dismissed Iran's latest reply to a United States peace proposal as "I don’t like it - TOTALLY UNACCEPTABLE," renewing investor concerns about oil supply through the Strait of Hormuz and prompting weakness in U.S. airline stocks in premarket trade.
Brent crude futures jumped 2.7% to $104.02 a barrel at 05:14 ET (09:14 GMT), while U.S. West Texas Intermediate climbed 2.3% to $97.55 a barrel. Market participants cited the Strait of Hormuz remaining largely closed as keeping global supply tight.
That rise in oil prices corresponded with declines among major U.S. carriers before the market open. Shares of Southwest Airlines and United Airlines each fell about 1% in premarket trading, while Delta Air Lines and American Airlines were down roughly 0.8% apiece.
The gains in crude reversed much of last week's drop, when both Brent and WTI fell roughly 6% amid hopes that the 10-week-old conflict might be moving toward a resolution and shipments through the strait could soon resume. Those expectations abated after Iran published its counter-proposal on Sunday.
Iran's response extended well beyond the narrower ceasefire framework the U.S. had outlined, according to accounts from Iranian state media and the semi-official Tasnim news agency. Tehran set out demands including a broader cessation of hostilities across the region, explicitly mentioning Lebanon where Israel is engaged with Iran-backed Hezbollah; compensation for war damage; an end to the U.S. naval blockade; guarantees against further strikes; sanctions relief; and lifting a ban on Iranian oil exports. Iran also underscored its claims of sovereignty over the Strait of Hormuz.
Those elements in Tehran's counter-proposal appeared to dash earlier hopes that the conflict might de-escalate quickly, sustaining pressure on oil markets. The continued closure of the strait was cited as a key factor keeping global supply tight and supporting the recent price advance.
Investors reacted to the prospect of a longer-lasting supply disruption by marking down shares of airlines, a sector sensitive to fuel-price moves. The premarket declines in carrier stock prices reflected concerns about higher operating costs should crude remain elevated.
President Trump's rapid rejection of the proposal on his Truth Social account signaled a firm U.S. stance, while Tehran's list of broader political and economic demands suggested significant gaps remain between the two sides. With both oil benchmarks rebounding and regional dynamics unsettled, market participants will likely continue to monitor developments around the Strait of Hormuz and any further statements from the parties involved.
Summary
Oil climbed as Iran's counter-proposal to a U.S. peace plan was rejected by President Trump, keeping the Strait of Hormuz effectively closed and prompting premarket declines in major U.S. airline stocks due to concerns about prolonged supply disruption and higher fuel costs.
- Key points
- Brent crude rose to $104.02 a barrel, up 2.7% at 05:14 ET; U.S. WTI reached $97.55, up 2.3%.
- Southwest and United shares fell about 1% in premarket trading; Delta and American edged down roughly 0.8%.
- Energy and airline sectors are directly affected by the potential for sustained supply disruption through the Strait of Hormuz.
- Risks and uncertainties
- Prolonged disruption of oil shipments through the Strait of Hormuz could keep global supply tight and sustain higher crude prices, impacting energy markets.
- Elevated fuel costs would pressure airline operating margins, affecting the commercial aviation sector.
- Broader regional demands in Iran's proposal, including calls to lift sanctions and end naval blockades, increase uncertainty about the timeline and scope of any diplomatic resolution.