On Sunday, May 11, calling it “totally unacceptable”, President Donald Trump rejected Iran’s peace proposal and increasing oil prices surging by $3 a barrel. The rejection deepened concerns that the 10-week-old conflict between the United States and Iran will drag on, keeping shipping through the Strait of Hormuz paralyzed. Energy markets responded immediately, with Brent crude climbing to $104.50 a barrel and U.S. West Texas Intermediate rising to $98.48.
Trump announced his position in a post on Truth Social. “I have just read the response from Iran’s so-called ‘Representatives.’ I don’t like it — TOTALLY UNACCEPTABLE!” he wrote.
Iran’s counteroffer, delivered through mediators and reported by Iranian state media on Sunday, contained several demands Washington was unwilling to accept. Tehran’s response focused on ending the war on all fronts — including Lebanon, where U.S. ally Israel is fighting Iran-backed Hezbollah militants — and included a demand for compensation for war damages while emphasizing Iranian sovereignty over the Strait of Hormuz, Iranian state TV said.
Iran’s semi-official Tasnim news agency said the proposal also called for the U.S. to lift Office of Foreign Assets Control sanctions on Iranian oil sales within a 30-day period and to end the naval blockade on Iran. Those conditions went well beyond what Washington had offered as a starting point for talks.
The gap between the two sides was stark. The U.S. proposal was drafted to re-open negotiations, while Iran’s response amounted to a set of preconditions that included sanctions relief, a Lebanon ceasefire, and compensation — all before any formal peace process began.
Iranian state media framed Tehran’s response as a rejection of the U.S. proposal, characterizing Washington’s offer as a demand for “surrender.”
The breakdown in diplomacy had an immediate effect on energy markets. Brent crude futures climbed $3.21, or 3.17%, to $104.50 a barrel, and U.S. West Texas Intermediate rose $3.06, or 3.21%, to $98.48 a barrel by 2203 GMT on Monday, according to Reuters.
One exception to the strait’s near-total closure came Sunday, when a Qatari LNG tanker made a rare transit. The QatarEnergy-operated carrier Al Kharaitiyat passed safely through the strait and was heading for Pakistan’s Port Qasim — the first Qatari vessel carrying liquefied natural gas to cross the strait since the U.S. and Israel started the war on February 28, according to shipping analytics firm Kpler. Sources told Reuters the passage had been approved by Iran to build confidence with Qatar and Pakistan, both of which have faced energy shortages. It did little to calm broader market anxiety.
Violence around the strait intensified over the same weekend. The United Arab Emirates said it intercepted two drones coming from Iran, while Qatar condemned a drone attack that struck a cargo ship from Abu Dhabi in its waters. Kuwait said its air defences dealt with hostile drones that entered its airspace.
Regional and Global Impact
The Strait of Hormuz carried one-fifth of the world’s oil supply which was before the war.Its continued closure has emerged as the central pressure point of the conflict, disrupting energy flows to Europe, Asia, and beyond.
Surveys show the war is unpopular with U.S. voters facing sharply higher gasoline prices, less than six months before nationwide elections that will determine whether Trump’s Republican Party retains control of Congress.
Christopher Wong, currency strategist at OCBC Bank, said oil markets remain highly reactive. “Oil has stayed highly sensitive to headlines, with markets caught between hopes of de-escalation and the risk that sporadic clashes keep an energy-risk premium embedded in forex exchange and rates,” he said.
Israeli Prime Minister Benjamin Netanyahu weighed in separately on the Lebanon dimension of the conflict. An end to hostilities with Iran would not necessarily bring an end to the war in Lebanon, Netanyahu said in a CBS “60 Minutes” interview. He also said Israeli planners had underestimated Iran’s ability to choke off traffic through the strait. “It took a while for them to understand how big that risk is, which they understand now,” he said.
NATO allies have refused calls to send ships to open the Strait of Hormuz without a full peace deal and an internationally mandated mission, leaving Washington with limited multilateral support for any military option to clear the waterway.
Background
The U.S. and Israel launched strikes on Iran on February 28, starting a conflict now in its tenth week. The Strait of Hormuz — a narrow waterway between Iran and Oman — became a flashpoint almost immediately, with Iran using drone attacks, mines, and ship seizures to restrict traffic. A ceasefire was first announced on April 7 and a separate Lebanon-focused ceasefire was announced on April 16, but neither has held fully. Russia and China vetoed a UN Security Council resolution on April 7 that would have called on states to ensure safety in the strait, saying the proposal was biased against Iran. Beijing hosted Iranian Foreign Minister Abbas Araghchi last week, with Chinese top diplomat Wang Yi reaffirming the “strategic partnership” between the two countries while urging Tehran to pursue a diplomatic resolution.
What Happens Next
President Donald Trump is scheduled to visit Beijing on Wednesday for talks with Chinese leader Xi Jinping, as both sides prepare to address tensions involving Iran and the ongoing global energy crisis. Ben Emons, managing director at Fed Watch Advisors, said the base case for the Trump-Xi summit is a “managed détente with potentially thin deliverables” — likely amounting to vague joint language on de-escalation and keeping oil flowing. Britain said on Saturday it is deploying a warship to the Middle East in preparation for a future multinational mission to ensure safe transit through the strait, coordinating with France on the proposal. No new round of U.S.-Iran talks has been scheduled as of May 11. The Strait of Hormuz remains largely closed to commercial shipping.
