Trump 'No' To Iran's Peace Offer Sends Oil Soaring

(MENAFN- Live Mint) Crude oil prices surged over 4% on Monday, after US president Donald Trump rejected Iran's offer to reopen the Strait of Hormuz if the US halts military strikes.

Around 6.30 pm, the November Brent crude contract on the Intercontinental Exchange was trading at $106.50 per barrel, up 2.09% from its previous close. It reached a high of $108.7 per barrel during the day. The oil spike sent panic over global markets, with stocks in Japan, South Korea and China sliding. The benchmark Nifty index fell 1.6%, while Japan's Nikkei, Korea's Kospi and China's Shanghai Composite fell 0.73%, 2.70% and 1.67% respectively.

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On Friday, Iranian foreign minister Abbas Araghchi offered to reopen the Strait, traditionally a key route carrying 20% of global oil and gas supplies, and restart nuclear negotiations with the US within seven days, if the Trump administration agreed to Iran's conditions. A day later, Trump rejected Iran's proposal for a seven-day roadmap to end the war, reopen the Strait of Hormuz and resume nuclear talks.

A Wall Street Journal report on Saturday said president Trump had turned down Iran's conditional offer, telling aides that he expects US strikes on the country to resume after November's mid-term elections.“They made a proposal, but I rejected it,” Trump said.

Higher crude prices put pressure on India

Higher oil prices hurt oil marketing companies (OMC), since retail prices of petrol and diesel have remained stagnant since May.

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In a recent report, rating agency Icra estimated the marketing margins of oil marketing companies (OMCs) in September at negative ₹8 per litre on petrol and negative ₹9 a litre on diesel, and cooking gas under-recoveries at around ₹300 per cylinder. For OMCs, marketing margin is the difference between their cost of acquisition of the fuel and the retail selling price charged to consumers.

The latest volatility in the oil market was sparked by the escalation of the US-Iran conflict around 8 September. The surge in oil prices has a major bearing on the Indian economy as the country imports 90% of its oil requirements. An increase of $1 per barrel for a year may lead to an increase of around ₹18,000 crore in the country's annual import bill, which is usually over $120 billion.

In the first five months of FY27, India imported crude oil worth $74.85 billion, crossing 60% of last fiscal's total imports of $123.38 billion.

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In August, wholesale price inflation inched up to 9.92% from 9.78% in July, as the West Asia flare-up boosted energy prices and food items turned dearer.

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