Hopes for a peace deal with Iran diminished significantly over the weekend, increasing concerns that the ongoing global energy crisis could persist and leading the United States to contemplate military operations aimed at reopening the vital Strait of Hormuz.
As the market reacted to these developments, futures linked to the Dow Jones industrial average dropped by 200 points, or 0.40%. Similarly, S&P 500 futures fell by 0.33%, while Nasdaq futures were down 0.28%. In the commodity markets, U.S. oil futures increased by 2.7%, reaching $97.97 a barrel, and Brent crude mirrored this climb with a 2.7% rise to $104.01. Conversely, gold prices decreased by 0.76%, settling at $4,695 per ounce.
In foreign exchange markets, the U.S. dollar strengthened, rising 0.2% against the euro and 0.14% against the yen. The yield on the 10-year Treasury note remained steady at 4.36%.
Iran’s response to a U.S. ceasefire offer was reported on Sunday, suggesting that talks should encompass a comprehensive end to hostilities, extending to conflicts in Lebanon. Notably, Iran put forward a proposal to gradually reopen the Strait of Hormuz, conditional on the United States easing its naval blockade. While negotiations over nuclear issues were said to be possible during a proposed 30-day window, Tehran firmly rejected demands to dismantle its nuclear facilities or freeze uranium enrichment for a 20-year period. Additionally, Iran sought the release of its funds that are currently frozen abroad.
In reaction, former President Trump criticized Iran’s response as “totally unacceptable,” although he did not specify any particular proposals that prompted his remarks. He accused Tehran of “playing games” with the U.S. for decades but added a warning: “They will be laughing no longer!”
Analysts noted that Iran’s stance appeared largely unchanged, suggesting that its leadership feels confident and is unwilling to make significant concessions. The urgency in resolving the situation is heightened by the risk that unless the Strait of Hormuz is reopened soon, global oil reserves could reach critically low levels, potentially triggering substantial price increases.
Last week, Trump launched an initiative, dubbed Project Freedom, aimed at guiding commercial vessels through the Persian Gulf. Some ships successfully navigated the strait amid U.S. destroyers fending off Iranian aggressions, but the operation was paused less than two days later.
Earlier on Sunday, Energy Secretary Chris Wright revealed that the U.S. had indeed halted Project Freedom at Iran’s request. He referenced discussions between the nations, indicating that the potential for a military approach to reopen the strait has been on the table. “If we militarily reopen the strait—which is a challenge, it’s not a one or two-day endeavor— they said, ‘Wait a minute, wait a minute, let’s make a deal. Let’s engage in the talks about the nuclear program, and let’s make a deal,” Wright explained.
The intention behind pausing Project Freedom was to explore avenues for a diplomatic resolution with Iran. However, Wright cautioned that should a feasible path for a negotiated settlement fail to emerge in the coming days, the U.S. would revert to military means to reopen the Strait of Hormuz.
