Oil Prices Surge as Trump Rejects Iran Truce Offer, Inflation Fears Return

HONG KONG, Sept 28 — Oil prices spiked and bond yields rose on Monday after President Donald Trump rejected an Iranian offer of a seven-day truce, reigniting inflation concerns. Stock markets were mixed as traders awaited key US economic data.

Tehran last week presented a plan at the UN General Assembly for a halt in hostilities that would see the Strait of Hormuz reopened, potentially easing a severe supply crisis that has driven up costs worldwide.

The waterway is critical to global energy supply and is now central to the conflict between the US and Iran, especially with Houthis seizing Yemen's entire Red Sea coast, including the Bab al-Mandab Strait, a vital shipping lane.

However, the US president told reporters outside the White House: "I reject their proposal."

Still, he told Axios that he expects negotiations to resume.

"They want to make a deal, but it is not the deal that I want to make," he said. "It is what we would have maybe agreed to a year ago."

"They overplayed their hand," Trump added in the interview published Sunday.

Citing sources familiar with the matter, Axios reported that indirect talks between Washington and Tehran could take place as early as Monday.

Iran continues to stand by its conditions for reopening the Strait, including:

• The release of frozen assets
• The lifting of sanctions on its oil
• An end to the US naval blockade

Oil prices, which fell more than 2% on Friday following news of the offer, rebounded at the start of the new week, with Brent crude back above $106 a barrel.

That renewed inflation concerns and weighed on stock markets.

Seoul shed more than 2% as it reopened after a long break, while Tokyo, Shanghai, Manila, Bangkok, and Jakarta also dropped.

There were gains in Hong Kong, Sydney, Singapore, and Wellington.

Bond yields climbed, with the average on a gauge of world bonds topping 4% last week for the first time since 2007, according to Bloomberg.

The rise in prices puts the focus back on the Federal Reserve ahead of its next policy meeting at the end of October. CME's FedWatch tool puts the chances of a second successive interest rate hike at more than 65%.

Before that decision, investors will see the release of the bank's preferred gauge of inflation this week, as well as a key jobs report that could play a vital role in policymakers' thinking.

"Middle East tensions have flared again after President Donald Trump rejected Iran's latest proposal to reopen the Strait of Hormuz," wrote Stephen Innes at Quintex Intel.

"Oil has pushed higher, Asian equities are softer, and suddenly the brief Friday reprieve in global fixed income looks more like an intermission than the end of the show."

Still, he added: "The market is still pricing some probability that everyone eventually finds their way back to the table, even if they continue to spend the next few weeks shouting across it first."