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Oil prices jumped more than 2% on Monday after United States President Donald Trump ruled out extending the framework agreement with Iran, heightening concerns over tensions surrounding the Strait of Hormuz.
International benchmark Brent crude rose 2.4% to $90.60 per barrel as of 1850GMT, while U.S. benchmark West Texas Intermediate (WTI) climbed 2.2% to $84.20.
Trump told reporters that he was not seeking an extension of the agreement reached with Iran in June through Pakistani mediation, as its 60-day negotiating window neared expiration without a comprehensive settlement.
“They want to make a deal, but they are not going to make the kind of a deal that I feel is necessary,” Trump said.
He reiterated that Iran would not be allowed to acquire nuclear weapons.
His remarks renewed concerns that stalled diplomacy could trigger further escalation and disrupt energy shipments through the Strait of Hormuz, a critical route for global oil trade.
Trump also claimed that the United States had established “total control” over the strait through its blockade.
“The strait is open, and the oil prices are coming down, and they will continue to come down unless we decide to do something far more drastic than we are doing,” he said.
Oil prices had traded lower earlier Monday as investors weighed geopolitical risks against indications that Gulf producers were maintaining substantial shipments through the waterway, limiting fears of an immediate supply shock.
However, prices later rose as Washington and Tehran showed no signs of reaching a deal to reopen the strait after nearly six months of war, even though Monday was the day the U.S.-Iran cease-fire was due to expire.
Trump also threatened military action against Oman if it interfered with a U.S.-Iran deal.
“The ongoing diplomatic gridlock between Washington and Tehran over transit through the Strait of Hormuz has kept crude prices elevated,” said David Morrison, an analyst at Trade Nation.
Wall Street stocks retreated Monday as oil prices advanced and a jump in U.S. Treasury yields discouraged equity purchases.
The yield on the 30-year U.S. Treasury bond climbed to 5.31%, its highest level since June 2007.
Analysts said rising Treasury yields suggested markets believe inflation will remain elevated, while a flood of U.S. bonds reaching the market could keep the U.S. deficit high and push investors to demand higher yields.
“When you get a move like that in oil and interest rates, it just kind of tends to serve as a headwind. This means a little bit less risk-taking than you might have otherwise,” said Briefing.com analyst Patrick O’Hare.
“There’s just not a lot of buying interest in today’s session,” O’Hare said, adding that low trading volumes during the summer vacation period could amplify market moves.
All three major U.S. indexes finished lower, with the S&P 500 down 0.5%.
Earlier, London, Paris and Frankfurt also closed lower.
A paper from the European Central Bank (ECB) highlighted growing concern about the spillover effects of a dot-com-style bubble from artificial intelligence (AI) on European markets.
“We argue that economic research on past technological revolutions points to a worrisome conclusion: a correction of current stock market valuations is likely,” the ECB paper said.
The paper described a U.S. pullback in AI equities as a risk for the European Union (EU).
“The effects of a U.S. correction could extend beyond financial markets to euro area sentiment, financing conditions and hiring,” the ECB said.
“A U.S. AI fallout would not remain a U.S. problem,” it added.
On the corporate front, attention turns to earnings this week from retail giants Walmart, Home Depot and Target, which could offer a clearer view of sentiment among American consumers.
Recent statistics have pointed to a weakening U.S. labor market and slower consumer spending.
However, even poor results from major retailers could support the U.S. stock market by easing inflation concerns and lowering expectations for Federal Reserve (Fed) rate hikes, said Ipek Ozkardeskaya, an analyst at Swissquote.
“Results pointing to weaker domestic consumption could further tame inflation worries, help ease Fed hike bets and hence put downward pressure on U.S. yields,” she said.
“That would be a positive development for the major U.S. indices, heavy in technology,” she added.
In Asia, Hong Kong was lifted by tech giants Alibaba, Tencent and JD.com, while Shanghai and Taipei also rose.
Seoul was closed for a holiday.
Tokyo advanced as chipmaker Kioxia soared more than 15%, while SoftBank, Advantest and Tokyo Electron rose between 1.6% and 2.6%.
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