Global stock markets retreated sharply Monday after U.S. President Donald Trump rejected Iran’s latest response to a proposed peace agreement, reigniting fears of prolonged conflict in the Middle East and triggering a surge in oil prices. Major equity benchmarks across Asia and Europe fell more than 1% as investors reacted to growing uncertainty surrounding negotiations aimed at ending the 10-week Iran conflict, which has severely disrupted shipping through the Strait of Hormuz — a critical artery for global energy supplies.
Trump described Tehran’s response to Washington’s peace framework as “TOTALLY UNACCEPTABLE” in a social media post Sunday, signaling a fresh breakdown in diplomatic efforts. Iran’s proposal reportedly included demands for sanctions relief, release of frozen assets, compensation for war damages, and recognition of its sovereignty claims over the Strait of Hormuz.
Oil Prices Jump as Investors Fear Extended Supply Disruptions
The deteriorating negotiations pushed Brent crude above $104 per barrel, while U.S. crude approached $100 as traders worried the Strait of Hormuz could remain partially blocked for an extended period. The waterway handles nearly one-fifth of global oil shipments, making any disruption a major threat to world energy markets.
Rising oil prices fueled concerns about inflation, economic growth, and central bank policy, prompting investors to reduce exposure to risk assets.
European stocks remained under pressure throughout the session, with the pan-European STOXX 600 hovering near flat after earlier declines, while defense, industrial, and luxury shares posted some of the steepest losses.
Asian markets also weakened broadly. Japan’s Nikkei 225 fell 0.5%, while Indian equities suffered steeper declines amid fears of higher import costs and worsening inflation tied to rising crude prices.
Indian Markets Among Worst Hit
India’s Sensex plunged more than 1,100 points and the Nifty slipped below 23,900 as investors reacted not only to geopolitical tensions but also to Prime Minister Narendra Modi’s public appeal for fuel conservation and reduced discretionary spending.
The Indian rupee weakened sharply against the U.S. dollar, while energy-sensitive sectors including airlines, oil marketing companies, and consumer discretionary stocks faced heavy selling pressure.
Analysts warned that prolonged oil prices above $100 per barrel could widen India’s current account deficit and complicate efforts by the Reserve Bank of India to control inflation.
Safe-Haven Demand Rises
Investors rotated toward traditional safe-haven assets, including the U.S. dollar and government bonds, while volatility increased across equity markets.
Despite the market selloff, some strategists noted that hopes for a diplomatic breakthrough remain alive, particularly ahead of planned discussions between Trump and Chinese President Xi Jinping later this week. China is expected to play a growing role in mediation efforts given its economic ties with both Tehran and Gulf energy markets.
Iran, meanwhile, defended its counterproposal as “reasonable” and accused Washington of maintaining “unreasonable demands.” Tehran said its primary objectives remain ending hostilities, lifting sanctions, and restoring maritime security in the Gulf region.
Investors Brace for Continued Volatility
Market participants now expect heightened volatility across equities, currencies, and commodities as geopolitical risks intensify.
The latest breakdown in negotiations has also renewed fears that elevated energy prices could delay interest-rate cuts globally and weigh on corporate earnings in the months ahead.
With sporadic clashes and drone incidents continuing across the Gulf region despite a fragile ceasefire, traders remain focused on whether diplomatic channels can prevent a broader escalation that could further destabilize global markets.
