Oil Gains as Trump Rejects Iranian Proposal to Reopen Hormuz Strait

Market Wrap-Up: Oil Rises as US-Iran Tensions Keep Supply Risks in Focus

Oil prices climbed on Monday after US President Donald Trump rejected Iran’s conditional proposal to reopen the Strait of Hormuz and resume nuclear negotiations with Washington.

US crude futures for November delivery rose 1.3% to $93.62 a barrel, while Brent crude gained 1.8% to $106.31 a barrel. The move followed reports that Trump had rejected Tehran’s latest proposal, with The Wall Street Journal reporting that he told aides he expects US strikes on Iran to resume after November’s midterm elections.

Trump later confirmed that he had rejected the proposal. Iran’s Foreign Minister Abbas Araghchi had offered to reopen the key shipping route and restart nuclear negotiations within seven days if the Trump administration agreed to Tehran’s conditions.

Those conditions included an end to what Tehran describes as US “acts of aggression”, the lifting of the naval blockade and economic sanctions, and the release of Iranian assets, according to Iranian Foreign Ministry spokesman Esmaeil Baghaei. Separately, a Saudi-led coalition said it had intercepted projectiles that it attributed to Iran-backed Houthi rebels.

Elsewhere, gold prices fell to around $4,215 an ounce in early Asian trading. The decline came as a stronger US dollar and hawkish signals from Fed officials weighed on the non-yielding precious metal.

Federal Reserve officials indicated that further policy tightening could be needed to contain persistent inflation pressures. Cleveland Fed President Beth Hammack said inflation risks remained elevated and that monetary policy needed to be at a restrictive stance to help bring inflation back towards target, while Fed Governor Michael Barr said further policy adjustments could be needed.

In FX markets, AUD/USD held just above 0.7000 after reaching its lowest level since 4 August on Friday. Traders are awaiting the Reserve Bank of Australia’s meeting on Tuesday, with markets expecting a 25-basis-point rate increase. At the same time, higher US Treasury yields and expectations of another Fed rate increase in October continued to support the US dollar.

USD/JPY rose towards 157.75 in Asian trading, recovering part of Friday’s pullback. The pair remained supported by higher US yields, expectations of further Fed tightening and geopolitical uncertainty surrounding the US-Iran conflict. 

The yen showed a limited reaction to the BoJ’s July meeting minutes, which indicated that financial conditions remained accommodative while firms were gradually passing higher raw-material costs through to product prices.

Markets will continue to monitor developments surrounding the Middle East conflict, while comments from FOMC members could provide further clues on the Fed’s policy outlook.

Attention will also turn to key US data on inflation, labour-market conditions and economic activity, alongside the RBA’s interest rate decision, as markets assess the outlook for monetary policy.

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Oil:

Key takeaway:

• Strait of Hormuz uncertainty keeps supply risks in focus.
• US-Iran tensions remain a key driver for crude prices.

Technical Outlook:

• Daily Bias: Cautiously Bullish
• Support: 91.51
• Resistance: 96.81

Gold:

Key takeaway:

• Hawkish Fed expectations limit bullion demand.
• Higher-for-longer rate risks weigh on the non-yielding metal.

Technical Outlook:

• Daily Bias: Bearish
• Support: 4,150
• Resistance: 4,315

AUD/USD:

Key takeaway:

• RBA rate decision takes centre stage for the Australian dollar.
• US rate expectations continue to shape AUD/USD sentiment.

Technical Outlook:

• Daily Bias: Bearish
• Support: 0.70000
• Resistance: 0.70429

USD/JPY:

Key takeaway:

• US-Japan rate divergence continues to favour USD/JPY.
• Middle East tensions add another layer of uncertainty for the yen.

Technical Outlook:

• Daily Bias: Neutral
• Support: 156.94
• Resistance: 159.04

Calendar Watch This Week

• US Labour Market: JOLTS Job Openings, ADP Employment Change and Initial Jobless Claims will provide further signals on labour-market conditions.
• US Inflation & Economic Activity: The PCE Price Index will offer fresh clues on inflation, while the ISM Manufacturing PMI will provide an update on US manufacturing activity.
• Fed Officials’ Remarks: Comments from FOMC members could offer further clues on the Fed’s rate path.
• RBA Interest Rate Decision: Markets expect a 25bp rate hike, putting the focus on the policy outlook for AUD.

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