Stocks drop, oil rises as Hormuz hopes fade

Middle East tensions worsened after Donald Trump rejected Iran's offer for a seven-day truce. Stocks generally declined, while oil prices continued to rise as hopes for reopening the Strait of Hormuz faded. Trump stated that talks would resume this week, but this did not alleviate the gloom on trading floors. Traders anticipated further inflation increases, prompting the Federal Reserve to tighten monetary policy more.

The US president denied a report claiming he offered Iran sanctions relief and the release of frozen funds, calling the story a hoax. Iran's state broadcaster reported that Foreign Minister Abbas Araghchi would meet Qatari representatives, with talks expected to focus on Iran's conditions for reopening the Strait of Hormuz. The waterway is crucial to global oil and gas deliveries and is now central to the US-Iran conflict, especially as Iran-backed Houthis seized the Red Sea coast, including the Bab al-Mandab Strait.

Analysts expect the conflict to continue affecting markets and the global economy. Crude oil prices surged more than one percent, and both main US crude contracts rose, signaling the ongoing impact of supply disruptions. Average UK diesel prices reached a record high. Equity markets declined following a day of losses for all three main Wall Street indexes.

Gold prices stabilized around US$4,160 as traders bet on further rate hikes, reducing its appeal as a non-interest bearing asset. Investors are awaiting US inflation and jobs data, which could influence the Federal Reserve's decision-making, potentially leading to additional rate hikes to control inflation.