Oil prices surged on Monday after President Donald Trump rejected Iran’s latest response to a U.S. peace proposal as “totally unacceptable,” sending U.S. airline stocks lower in premarket trading as investors braced for a prolonged supply disruption.
Oil Markets React to Diplomatic Setback
Brent crude futures climbed 2.7% to $104.02 a barrel at 05:14 ET (09:14 GMT), while U.S. West Texas Intermediate gained 2.3% to reach $97.55 a barrel. Meanwhile, the Strait of Hormuz remained largely closed, tightening global supply even further.
Consequently, shares in Southwest Airlines and United Airlines dropped 1% in premarket trading. Similarly, Delta Air Lines and American Airlines each slipped 0.8%.
American Airlines (AAL) also traded lower in Monday’s premarket session as Trump’s rejection of Iran’s counter-proposal dimmed hopes for a near-term ceasefire, leaving the carrier exposed to sustained jet fuel inflation at a time when management is already working to close the margin gap with United and Delta.
Delta Air Lines (DAL) slipped to roughly $72.60 from Friday’s $73.11 close, as Trump’s rejection of Tehran’s counter-proposal reignited fears that the 10-week-old conflict will keep fuel costs elevated and squeeze margins at the premium-focused carrier into the second half.
Hopes for Resolution Fade
Monday’s spike in oil prices wiped out much of last week’s losses, when both contracts shed roughly 6%. At that point, traders had bet that the 10-week-old conflict was nearing a resolution and that oil shipments through the strait would soon resume.
However, those hopes evaporated after Iran released its counter-proposal on Sunday. Notably, Tehran’s offer went well beyond the narrow ceasefire framework Washington had put forward. Instead, Iran called for a broader end to fighting across the region, including in Lebanon, where U.S. ally Israel continues to clash with Iran-backed Hezbollah.
Iran’s Expanded Demands
Furthermore, Iran demanded compensation for war damage, an end to the U.S. naval blockade, guarantees against further strikes, sanctions relief, and the lifting of a ban on Iranian oil exports, according to Iranian state media and the semi-official Tasnim news agency. In addition, Tehran emphasized its sovereignty over the Strait of Hormuz.
Trump dismissed the proposal almost immediately. “I don’t like it — TOTALLY UNACCEPTABLE,” he wrote on Truth Social.
Originally, Washington had proposed halting the fighting first before tackling more complex issues, including Iran’s nuclear program.
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