Trump rejects Iran deal; oil spikes on conflict fears

Markets lurched on Sunday evening as President Trump rejected Iran's response to his latest peace proposal, declaring it 'totally unacceptable' and signaling Washington will press the issue further at his scheduled Beijing summit with Xi Jinping this week. The move immediately triggered a commodities bid, with crude oil jumping as traders priced in the risk of a sustained closure of the Strait of Hormuz, through which roughly one-third of global seaborne oil passes. Equity futures fell and the US dollar rose against major peers as investors rotated into safe-haven positioning.

Saudi Aramco, however, reported a 26% jump in first-quarter profit, suggesting the energy major has weathered the initial shock better than feared. The company's East-West pipeline has reached capacity, allowing it to circumvent the strait entirely and maintain production volumes. Despite Aramco's resilience, the company warned that even if a ceasefire holds, normalisation of energy flows and pricing will take months. Qatar sent its first LNG tanker through the strait since hostilities began, a small signal that shipping is resuming in fits and starts, but uncertainty remains acute.

Bond markets are now pricing in a potential Fed policy pivot in the opposite direction: rather than cutting rates, the central bank might need to hold rates higher or even raise them to combat potential inflationThe rate at which prices rise across an economy. from the energy shock, according to Pimco CIO Dan Ivascyn. Energy-dependent economies like the Philippines face particular headwinds, with the peso expected to sink to new lows despite rate-hike expectations, as oil-import costs overwhelm currency support. Trump's tariff moves have also been declared unlawful by a federal trade court, adding another layer of uncertainty for risk-off sentiment.

The debate centers on whether Trump can actually negotiate a resolution or if the conflict extends through the summer. China's stated appetite to pressure Iran remains unclear, and Netanyahu has signaled Israeli operations are 'not over,' suggesting military momentumThe empirical fact that winners keep winning over the medium term. may continue regardless of diplomatic posturing. If the Strait blockade persists beyond May, inflationThe rate at which prices rise across an economy. expectations could force the Fed into a tighter stance, hurting growth stocks.