LONDON: Oil prices climbed more than 2% on Monday after US President Donald Trump rejected an Iranian peace proposal, raising concerns over the future of negotiations and the reopening of the Strait of Hormuz.
Brent crude futures rose $2.60, or 2.49%, to $106.92 a barrel at 0803 GMT. US West Texas Intermediate (WTI) crude gained $2.08, or 2.25%, to $94.49 a barrel.
Analysts said the rise followed Trump’s rejection of Iran’s proposal aimed at resolving the conflict and restoring wider flows through the Strait of Hormuz.
Iran presented its peace proposal last week during the UN General Assembly in New York. The proposal was reportedly delivered to US officials through Qatari mediators.
Although Trump rejected the proposal on Saturday, he said on Sunday that US negotiators were expected to hold further talks with Iranian representatives during the week, keeping the possibility of renewed diplomacy open.
Hamad Hussain, senior climate and commodities economist at Capital Economics, said the oil market remained in deficit despite some improvement in flows through the Strait of Hormuz.
Meanwhile, regional security concerns continued to support oil prices. A Saudi-led coalition in Yemen said it intercepted two ballistic missiles and two drones launched toward Saudi Arabia by Iran-backed Houthis.
However, oil supply from major Middle Eastern producers showed signs of recovery. Preliminary Kpler data indicated that crude exports from key regional producers rose to 12.8 million barrels per day in September, the highest level since the war began in February.
Saudi Arabia and the United Arab Emirates contributed to the increase, while shipments through the Strait of Hormuz also recovered. Flows through the strategic waterway were expected to reach around 7.4 million barrels per day this month.
Oil markets are also monitoring potential US restrictions on diesel exports. Brent gained 0.4% last week, while WTI declined more than 7% amid concerns that restrictions could affect US refining activity.
Goldman Sachs warned that a US diesel export ban could increase pressure on fuel markets globally, particularly in Europe, Latin America and Asia.
