Oil prices climb after Trump dismisses Iran’s response to peace plan

Oil prices have climbed after Donald Trump condemned Iran’s response to US proposals to end the war as “totally unacceptable”.

The president’s rejection of Tehran’s overture in a post on his Truth Social platform triggered a jump in Brent crude, the international benchmark for oil prices, by as much as 4% on Monday to $105.50 a barrel, before easing back to settle at $103.50.

The US had presented a peace proposal a week ago, said to consist of a 14-point memorandum of understanding that would reopen the strait of Hormuz, while setting a framework for further talks on Iran’s nuclear programme.

The Iranian counter-proposal reportedly suggested a shorter moratorium and included a refusal to accept the dismantling of its facilities.

Trump posted on Sunday evening: “I have just read the response from Iran’s so-called ‘representatives’. I don’t like it – totally unacceptable.”

The increase in tensions has added to fears that the oil prices could remain elevated for longer, as the strait of Hormuz – through which a fifth of the world’s oil and gas supply normally passes – remains effectively closed.

“While there’s some expectation that a major reignition of the war is less likely, given the US claims a ceasefire is still in place, severe supply constraints of commodities are set to continue,” said Susannah Streeter, chief investment strategist at the broker Wealth Club.

“With the crisis now into the 11th week, consumers, companies and countries are having to adapt to a world of constrained supplies.”

In the UK, the cost of government borrowing also rose amid fears for higher inflation – which can make it harder for central banks to cut interest rates – as well as uncertainty over Keir Starmer’s leadership after the local election results.

The yield on 30-year gilts rose by as much as 7 basis points on Monday morning to 5.64%, while the yield on the 10-year rose 5 basis points to 4.96%.

In European stock markets, the blue-chip FTSE 100 index opened slightly higher by 0.2%, with oil companies BP and Shell among the top risers. The French CAC 40, however, slipped by 0.5% and the German Dax dropped 0.9%.

Stock markets in Asia were more mixed, with Japan’s Nikkei dropping 0.4% and Hong Kong’s Hang Seng down 0.3%. The Shanghai Composite index rose by about 1% after official data on Monday showed that China’s factory gate prices rose 2.8% in April compared with the same point last year. The South Korean Kospi index rose 4.3%, helped by a rise in the tech company Samsung Electronics.

Trump is scheduled to meet China’s president Xi Jinping in Beijing this week, with the two leaders expected to discuss trade, Taiwan and China’s role in the conflict in the Middle East. It will mark the first time a US president has visited China in nearly a decade – the last visit was also by Trump during his first term in 2017.