Oil prices climbed above $106 per barrel on Monday after US President Donald Trump rejected Iran’s proposal for a seven-day truce, reviving concerns about disruption to global energy supplies.
Brent crude rose 1.8 per cent to $106.19 per barrel around 0330 GMT, while West Texas Intermediate gained one per cent to $93.34.
Iran had proposed a temporary halt to hostilities at the United Nations General Assembly last week, with the reopening of the Strait of Hormuz included in the plan. The waterway is a major route for global oil shipments.
Trump rejected the proposal, although he indicated that negotiations with Tehran could resume.
“I reject their proposal,” Trump told reporters outside the White House.
He later told Axios that Iran wanted a deal but that its proposal did not meet his expectations.
The renewed rise in oil prices also pushed bond yields higher and weighed on several Asian stock markets as investors assessed the potential inflationary impact of prolonged disruption in the Middle East.
Seoul's market fell more than two per cent after reopening from a long holiday, while Shanghai, Tokyo, Manila, Bangkok and Jakarta also recorded losses. Hong Kong, Sydney, Singapore and Wellington rose.
Iran has maintained that reopening the Strait of Hormuz would require the release of frozen Iranian assets, the lifting of sanctions on its oil exports and an end to the US naval blockade.
Indirect talks between Washington and Tehran could begin as early as Monday, according to sources cited by Axios.
The renewed oil price surge has also increased pressure on the US Federal Reserve ahead of its next policy meeting in October. Investors are awaiting the release of the central bank's preferred inflation measure and a key jobs report this week, which could influence its interest-rate decisions.
The latest developments have reversed some of the relief seen in financial markets last week when oil prices fell by more than two per cent following news of Iran's truce proposal.
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