Oil advances after Trump rejects Iran truce offer as US shares fall

Oil futures rose more than 4% before retreating from their peak on Monday, after President Donald Trump rejected Iran’s offer of a seven-day truce. Around 1400 GMT, Brent crude was up 2.2% at $106.60 a barrel, while West Texas Intermediate gained 2% to $94.33.

US stocks opened lower. The Dow fell 0.5%, the S&P 500 lost 0.4% and the Nasdaq dropped 0.6% about half an hour into trading.

Inflation concerns pushed government bond yields higher as markets bet the Federal Reserve would raise interest rates in October, after tightening this month. The dollar strengthened.

European markets moved higher, with London, Frankfurt and Paris up between 0.4% and 0.7% two hours before the close. Asian markets were mixed, and investors also reacted to Washington and Beijing extending their trade truce late last week.

European natural gas prices rose, while average UK diesel prices reached a record just shy of two pounds per litre, according to the RAC. Iran’s proposal at the United Nations General Assembly called for a halt in hostilities and reopening the Strait of Hormuz, a key route for oil and gas deliveries.

Iran has tied reopening the waterway to the release of frozen assets, the lifting of sanctions on its oil and an end to the US naval blockade. Investment director Russ Mould of AJ Bell said oil had strengthened after Trump rejected Iran’s proposal.