Oil Rebounds After Trump Rejects Iran’s Hormuz Ceasefire Plan

Oil prices climbed again in early Asian trading on Monday after US President Donald Trump rejected an Iranian proposal that would have paired a temporary ceasefire with a reopening of the Strait of Hormuz. Brent crude rose $1.82, or 1.74 per cent, to $106.14 a barrel and West Texas Intermediate gained $1.14 to $93.55 as of 2202 GMT on Sunday, according to Reuters. Prices had fallen about 2 per cent on Friday on hopes that diplomacy was gaining ground.

“They made a proposal, but I rejected it,” Mr Trump said, according to the Associated Press. The decision followed a three-hour meeting between his aides and Iranian officials on the sidelines of the UN General Assembly in New York.

What Iran offered

The plan, put forward by Iranian Foreign Minister Abbas Araghchi, set out seven points, as reported by AP. It called for an end to fighting for seven days, including in Lebanon; the release of about $12 billion in frozen Iranian assets by the US; a waiver of sanctions on Iranian oil; and the lifting of the US naval blockade. The Strait of Hormuz would open on the final day of the arrangement, and nuclear talks would resume afterwards. AP noted that the proposal closely resembled a memorandum of understanding agreed in June that collapsed soon after.

Iranian President Masoud Pezeshkian said his country remained open to diplomacy and was prepared to reopen the strait as part of a broader agreement, while asking Washington to show it was not seeking regime change. Mr Trump declined to say whether US military strikes would resume after the November midterm elections.

Washington says supplies are flowing

The administration has sought to play down the supply risk. Mr Trump has claimed the US has “total control” of the waterway, and Fox News reported record flows through the strait, citing 22 million barrels on Friday night and more than 20 million over the weekend. Treasury Secretary Scott Bessent, speaking on Fox’s “Sunday Morning Futures”, said Iran would make its final deliveries of oil to China within the next two weeks, and that China had substantially reduced its assistance to Tehran.

Analysts at ANZ said crude exports from West Asia rebounded to 12.8 million barrels a day in September, the highest since February 2026, as Saudi Arabia and the United Arab Emirates increased shipments through Hormuz. Even so, the bank cautioned that geopolitical risks remain elevated.

There is a second, domestic twist. Last week, Brent rose 0.4 per cent while WTI fell 7.9 per cent, a sharp divergence that ANZ linked to concerns that Washington could curb diesel exports. The bank cited record US diesel prices and a renewed debate over restricting shipments abroad. Such a step would keep more fuel at home but tighten supplies for importers elsewhere.

Why it matters for markets

Crude above $100 is feeding directly into US inflation at a time when the Federal Reserve has already begun raising rates. Higher energy costs lift prices for transport, airline tickets and manufactured goods, and they weigh on consumer spending. They have also contributed to the rise in Treasury yields, as investors demand more compensation for inflation risk. For energy producers and oil service companies, the elevated price environment supports earnings, while airlines, chemical makers and logistics firms face margin pressure.

The gap between Brent and WTI also matters for US refiners, which benefit when domestic crude is cheaper than the international benchmark. Any formal restriction on diesel exports would be a significant intervention in global fuel markets, and refiners that sell heavily overseas would be most exposed.

The India angle

For India, which imports the bulk of its crude oil, the rejection of the Iranian proposal is unwelcome news. Every sustained rise in Brent adds to the import bill, widens the current account deficit and puts pressure on the rupee, which opened at 95.86 to the dollar on Monday. Indian equity benchmarks fell sharply in early trade, with the Sensex down about 900 points by mid-morning.

State-run oil marketing companies such as Indian Oil, Bharat Petroleum and Hindustan Petroleum face pressure on their marketing margins if retail fuel prices are not adjusted. A US decision to limit diesel exports would also tighten the global diesel market, which could benefit Indian export refiners through higher product margins even as it raises costs for fuel importers in Asia and Europe.

What happens next

Mr Trump has said he expects US negotiators to hold further talks with Iran this week, and any sign of progress could quickly pull prices lower. On the other hand, a resumption of military strikes or disruption to tanker traffic would likely push Brent higher. Traders will also watch for a decision from Washington on diesel exports and for the weekly US inventory data due midweek.

Price quotes varied through the Asian session: a later Reuters update carried by Business Standard put Brent at $105.64 and WTI at $93.11, underlining how sensitive the market remains to each headline from the talks.