Hopes for a peace deal with Iran waned on Sunday, raising the risk that the global energy crisis will drag on and leaving the U.S. to weigh military operations to reopen the Strait of Hormuz.
Futures tied to the Dow Jones industrial average fell 200 points, or 0.40%. S&P 500 futures were down 0.33%, and Nasdaq futures lost 0.28%.
U.S. oil futures rose 2.7% to $97.97 a barrel, while Brent crude climbed 2.7% to $104.01. Gold fell 0.76% to $4,695 per ounce.
The U.S. dollar was up 0.2% against the euro and up 0.14% against the yen. The yield on the 10-year Treasury was steady at 4.36%.
On Sunday, Iran responded to the U.S. ceasefire offer, saying talks must focus on permanently ending the war on all fronts, including in Lebanon.
Sources also told the Wall Street Journal that Iran proposed gradually reopening the strait as the U.S. lifts its naval blockade.
While nuclear issues would be negotiated during a 30-day window, Tehran rejected demands to dismantle its nuclear facilities and suspend uranium enrichment for 20 years, the report said. Iran also requested the release of its frozen funds abroad.
Trump soon blasted Iran’s response as “totally unacceptable” without pointing to any specific proposals. He earlier accused Tehran of “playing games” with the U.S. for nearly 50 years, but added, “They will be laughing no longer!”
Analysts pointed out that Iran’s position has changed little, indicating the leadership believes it has the upper hand and is unwilling to budge.
Unless the Strait of Hormuz opens soon, global oil stockpiles will soon start hitting critically low levels and trigger a spike in prices.
Last week, Trump attempted to break the deadlock by announcing a military effort to guide commercial ships out of the Persian Gulf. A few ships made it through the strait as U.S. destroyers fought off Iranian attacks. But less than two days later, he paused Project Freedom.
Earlier on Sunday, Energy Secretary Chris Wright told CBS News’ Face the Nation that the U.S. “did stop Project Freedom at Iran’s request.”
“If we militarily reopen the strait—which is a challenge, it’s not a one or two-day endeavor, that’s an effort to do that—they said, ‘Wait a minute, wait a minute, let’s make a deal. Let’s make a deal, we’ll agree to reopen it. Let’s engage in the talks about the nuclear program, and let’s make a deal,’” he added.
The pause in Project Freedom was meant to pursue a deal with Iran, but “if it’s clear in the next few days that there’s not a good path to a negotiated settlement, we’ll go back to the military method to open the strait,” Wright warned.
On Sunday, hopes for a peace deal with Iran diminished, raising concerns that the ongoing global energy crisis could persist and prompting the U.S. to consider military operations to reopen the crucial Strait of Hormuz. This waterway is vital for the transport of oil, and its closure could have significant implications for global energy supplies.
In the financial markets, futures for the Dow Jones industrial average fell by 200 points, or 0.4%. The S&P 500 futures were down 0.33%, and Nasdaq futures decreased by 0.28%. Conversely, U.S. oil futures rose by 2.7%, reaching $97.97 per barrel, while Brent crude followed suit, also increasing by 2.7% to $104.01. In contrast, gold prices experienced a slight decline of 0.76%, settling at $4,695 per ounce. The U.S. dollar saw modest gains against both the euro and the yen, rising by 0.2% and 0.14%, respectively. Meanwhile, the yield on the 10-year Treasury note remained steady at 4.36%.
Iran’s response to the U.S. ceasefire proposal indicated that any negotiations should address a comprehensive end to hostilities, including conflicts in Lebanon. Reports suggested that Iran proposed a gradual reopening of the Strait of Hormuz contingent on the U.S. lifting its naval blockade. While discussions regarding nuclear issues would take place within a 30-day window, Iran firmly rejected demands to dismantle its nuclear facilities and to suspend uranium enrichment for a period of 20 years. Additionally, Tehran sought the release of its funds that are currently frozen abroad.
Former President Donald Trump criticized Iran’s response as “totally unacceptable,” although he did not specify any particular proposals. He accused Iran of « playing games » with the U.S. for nearly five decades but asserted that the time for such tactics was over.
Analysts noted that Iran’s stance has remained largely unchanged, suggesting that its leadership feels confident and is unwilling to compromise. The potential failure to reopen the Strait of Hormuz soon could lead to critically low global oil stockpiles, resulting in a substantial increase in oil prices.
Last week, Trump attempted to address the impasse by announcing a military initiative, referred to as Project Freedom, aimed at escorting commercial ships through the Persian Gulf. A few vessels managed to navigate the strait with the assistance of U.S. destroyers fending off Iranian attacks. However, just two days later, Trump decided to pause the initiative.
Earlier on Sunday, Energy Secretary Chris Wright stated during an appearance on CBS News’ Face the Nation that the U.S. had halted Project Freedom at Iran’s request. He indicated that reopening the Strait of Hormuz militarily would be a complex operation, not something that could be accomplished in just a day or two.
Wright explained that Iran’s suggestion to engage in negotiations about reopening the strait came as they expressed a willingness to discuss their nuclear program. He suggested that the pause in Project Freedom was intended to explore the potential for a diplomatic resolution. However, he cautioned that if it became clear in the coming days that a negotiated settlement was unlikely, the U.S. would revert to military options to reopen the strait.
The situation remains precarious, with the stakes high for both the U.S. and Iran, as well as for the global economy. As oil prices continue to fluctuate and tensions rise, the international community watches closely for any developments that could either lead to a peaceful resolution or escalate into military conflict. The ongoing negotiations and Iran’s firm stance underscore the complexity of reaching an agreement, particularly regarding sensitive issues like nuclear capabilities and regional conflicts. The next few days will be critical in determining the course of action both countries will take, with significant implications for global energy markets and geopolitical stability.
