Trump rejects Iran's seven-day Hormuz offer and oil jumps back above $106, but mediators line up fresh talks within days
Friday's relief rally rested on Iran's seven-day proposal to reopen the Strait of Hormuz, and over the weekend President Trump turned it down. He told reporters Iran wants to open the strait immediately because it is "losing so badly" and has "overplayed their hand," and described the offer as something "we would have maybe agreed to a year ago." The terms were the same ones Foreign Minister Abbas Araghchi set out at the UN last week: Iran reopens the strait within seven days and resumes nuclear talks if the US lifts its naval blockade of Iranian ports, waives sanctions on Iranian oil sales, releases frozen assets and agrees to a regional ceasefire that includes Lebanon. The Wall Street Journal added, citing US officials, that Trump has told aides he expects to resume bombing Iran after the November midterm elections, though he is reluctant to restart major combat partly to preserve dwindling munitions. UN Ambassador Mike Waltz dismissed that as "anonymous reporting" and said "politics have nothing to do with this," while Trump told Fox News that more strikes are "possible."
Neither side is walking away, though. Trump said on Sunday he expects talks to resume this week: "They want to make a deal, but it is not the deal that I want to make." Tehran says the rejection has not reached it formally through mediators and that it will not soften its demands. Araghchi said he was surprised Waltz was talking about the plan "as if he hasn't read it," and that "it is up to President Trump to choose." By Monday afternoon, reports said mediators expect to hold separate sessions with the US and Iranian sides on Monday or Tuesday over an amended version of the proposal. The Houthis also kept up the pressure on Saudi Arabia over the weekend, sending drones toward Riyadh and ballistic missiles at the Khamis Mushait air base, all intercepted. Riyadh schools moved to remote learning for a week, and a Houthi military source said bridges in the Saudi capital could be added to the target list.
Oil took back Friday's losses. Brent rose roughly 2.5-3.5% to around $106-108/bbl on the front-month contract (quotes vary by source, time and contract month; the later-dated December contract traded near $98-101), and WTI rose about 3.5% to around $95.70. Crude eased off its highs once the reports of new mediation talks came out. There is some offsetting supply relief in the background: Saudi Arabia's East-West pipeline is exporting again, and Kpler data suggest exports through the strait are on track for about 7.4 million barrels a day in September, far below pre-war levels but improving under naval escort.
02Stock market & economy
Higher oil fed straight into bond markets, and the 10-year Treasury yield touched 5.23% again on Monday, matching Friday's high since 2007, before trading around 5.21-5.22%. Futures markets now put the chance of another Fed hike at the late-October meeting above 70%, according to CME data cited by Yahoo Finance. US stock futures fell ahead of the open, with S&P 500 futures down about 0.4-0.5%, Nasdaq-100 futures down 0.6-0.8% and Dow futures down around 180 points, after Friday's close of 7,743.41 on the S&P 500, 27,068.72 on the Nasdaq and 51,828.62 on the Dow. Long-duration tech took most of the pressure, although Nvidia rose about 1.7% before the open after its board added $150 billion to its share buyback, the largest single increase in a buyback authorisation on record, bringing the total to $235 billion. The dollar index firmed above 101. Gold was the day's biggest casualty, down about 3% to around $4,150/oz at its low, its weakest level since early August (see the closing section).
It is a heavy week for data. US August PCE inflation and Micron's earnings are due on Wednesday, manufacturing data on Thursday, and the September jobs report on Friday. After a week of hawkish Fed speakers and a jump in consumers' inflation expectations to 4.6% in Friday's Michigan survey, a hot PCE print or another strong payrolls number would lock in the October hike that markets already largely expect. The Reserve Bank of Australia also decides on Tuesday, with a hike widely expected.
In Europe, ECB President Christine Lagarde told the European Parliament's economic affairs committee that "since our last meeting long-term interest rates have risen notably, which will slow growth and reduce pass-through by more than projected in our September exercise." She said inflation has not yet produced dangerous second-round effects in the eurozone, so a measured policy response, meaning the 25bp hike to a 2.5% deposit rate on 10 September and possibly more steps of that size, remains appropriate. That suggests higher bond yields are doing part of the ECB's work, which makes an aggressive run of hikes less likely. European equities held up well despite this: the STOXX 600 rose about 0.4%, with retailers outperforming and basic resources and tech lagging. The AEX gained 0.4% to 1,116.12 after touching 1,122 intraday, close to its record of just over 1,124. Oil names led: Shell rose around 1.6-1.9% and SBM Offshore about 2.7-2.9%. ASML and ASMI recovered from early losses, while Besi fell 1.7%. The midcap index climbed 1.0%, helped by construction firms BAM (+7.7%) and Heijmans (+5.4%). Dutch TTF gas eased from about €74 to €71.50/MWh.
For the unhedged USD sleeve (MSCI World ETF, S&P 500 ETF, High Dividend Yield ETF), the day is a replay of last week's main tension: a 10-year yield above 5.2% keeps weighing on the mega-cap tech names that dominate MSCI World ETF and S&P 500 ETF, while Nvidia's buyback provides some support to the largest single weighting. High Dividend Yield ETF gets a lift from its energy holdings when crude rises. A firmer dollar helps all three in euro terms. For AEX index ETF and EURO STOXX 50 ETF, the picture is mixed. Higher Brent is bad for eurozone inflation, but the AEX's heavy Shell weighting turns it into a partial hedge, which is why the Amsterdam index gained while US futures fell. Lagarde's comments also suggest the ECB sees less need to keep hiking as bond yields rise, which is a modest positive for European equity valuations.
03Also in the news
Russia-Ukraine diplomacy did not move. Zelensky said on Sunday that Moscow shows no sign it is ready to end the war, citing intelligence that Russia plans to increase spending on jet-powered drones and other munitions, and he urged Western allies to stay united. Russian drone strikes killed at least four people overnight into Sunday, including one in Kyiv. Separately, Trump declined to confirm Zelensky's claim from last week that he had made a "final decision" to license Ukrainian production of Patriot air-defence missiles; Poland has offered to host a production site if the licence comes through. With the Kremlin having already dismissed the US energy-ceasefire idea, there is still no sign of relief for European winter gas prices from this front.
04Off the beaten path
why gold is falling in the middle of a war
Gold is usually described as the asset people buy when the world looks dangerous, so a 3% drop on a day when the US rejected an Iranian peace offer and oil jumped looks backwards. Gold is now down about 3% in a week and more than 8% in a month, even as the Middle East conflict nears its seventh month. The explanation is that the war is reaching gold mainly through interest rates, not through fear.
Gold pays no interest, so the cost of holding it is the return you give up on safe alternatives. When oil rises, markets expect higher inflation, and in turn expect the Fed to keep hiking, with CME pricing now showing more than a 70% chance of an October increase. That pushes up Treasury yields, and in particular real yields, which are the return after expected inflation. With US real yields near two-decade highs, the opportunity cost of holding gold is the highest it has been in a generation. A strong dollar adds to the pressure, because gold is priced in dollars and becomes more expensive for buyers holding other currencies. Monday brought all three together: higher oil, a 10-year yield back at 5.23% and the dollar index above 101. Silver fell even more, at around 3.5%.
The broader lesson is that gold only acts as a war hedge when a conflict causes central banks to ease or causes investors to doubt the financial system. A war that raises inflation and makes central banks tighter can be negative for gold. Gold is still up about 13% over the past year, so the long-term safe-haven demand has not gone away; what has changed is that short-term price moves now track the Fed. For a portfolio made up of equity ETFs, this helps explain why gold has not cushioned the recent rate-driven sell-offs the way many investors expect. The things to watch are Wednesday's PCE data and Friday's jobs report. If they cool enough to weaken the case for an October hike, gold would probably rebound faster than equities.
Compiled from CNBC, The Wall Street Journal (via The Times of Israel, Iran International and The Hill), CBS News, NBC News, CNN, Axios, The National, Bloomberg, Newsweek, Newsquawk, investingLive, IC Markets, Trading Economics, Yahoo Finance, U.S. News & World Report, RFE/RL (via GlobalSecurity.org), Institute for the Study of War, RD.nl, De Aandeelhouder, and Welingelichte Kringen. This is a news summary, not investment advice — no position sizing or timing recommendations are implied.