Hopes for a ceasefire between the US and Iran encounter obstacles again! Trump rejects Iran's seven-day proposal; inflation pressure under $100 oil prices remains difficult to ease
According to Odaily, some media outlets cited sources reporting that U.S. President Trump rejected a proposed seven-day ceasefire by Iran and informed his aides that he expects to resume bombing Iran after the midterm elections in November. Previously, the Iranian government had stated that Iran hoped to exchange the reopening of the Strait, the resumption of nuclear negotiations, for the lifting of U.S. blockades on Iranian ports. However, Iran has made it clear it will show no flexibility on its nuclear program, and will not give up its rights, including uranium enrichment.
The diplomatic process to ease tensions between the U.S. and Iran has encountered significant new obstacles. Whether the Strait of Hormuz can return to stable passage continues to affect global energy supply and inflation expectations. The core of the latest major disagreement lies in both sides wanting to maintain their own leverage while demanding the other side first make concrete concessions.
According to sources cited by the media and regional mediators, Iran’s terms of exchange also included unfreezing some assets and lifting sanctions on oil exports to alleviate the impact of the blockade on foreign exchange earnings and the domestic economy. On the U.S. side, the hope is to continue using economic pressure to secure more favorable nuclear and regional security arrangements. U.S. officials believe that escort operations have already helped some tankers transit the strait, so for now, they see no need to lift the blockade in exchange for navigation. This has resulted in a deadlock: Iran links the resumption of shipping to economic relief, while the United States tries to improve shipping conditions without ending the blockade.
The so-called "seven-day plan" also includes a phased execution framework. Iranian Foreign Minister Araghchi publicly explained that, after the U.S. accepts the plan, relevant measures should be implemented within four to five days, followed by restoring strait passage on the sixth day and initiating final agreement talks on the seventh. Thus, resuming shipping, beginning talks, and reaching a nuclear deal are three separate phases. Before news broke of the proposal's rejection, U.S. officials were still describing their mediated contacts as positive and constructive, suggesting that communications channels remain open even as there are clear differences over the acceptance of specific conditions.
Political and military constraints add further uncertainty to subsequent developments. Trump has publicly stressed that handling the Iranian nuclear issue will not be based on electoral interests; U.S. government officials, however, privately described military assessments that identified the period after the midterm elections as a possible window for action. At the same time, the U.S. must weigh munitions stockpiles and the need to respond to other potential conflicts. In Iran, there is a coexistence of diplomatic efforts to ease economic pressure and the Revolutionary Guard’s insistence on existing conditions and readiness to continue confrontation, making internal support and implementation of the proposal even more difficult. Investors should focus on whether these positions can be converted into actionable measures and whether energy shipments through the Strait of Hormuz and the repeatedly threatened Bab el-Mandeb can be sustained amid ongoing Houthi threats.
The unprecedented $100 oil price lingers—uncertainties in restoring supply prolong inflationary pressures
The energy market continues to price in both the "possibility of diplomatic breakthroughs" and "the reality of ongoing supply constraints." On September 25, Brent crude futures settled 2.1% lower at $104.32 per barrel; WTI fell 2.3% to $92.41. The decline was influenced by hopes for a ceasefire and possible U.S. restrictions on diesel exports. Therefore, the latest developments regarding Trump's rejection of the proposal should not be reverse-inferred as the cause of oil price increases that day. What is more notable is that, even after a pullback, Brent remains at historic highs above $100, indicating that the market has not fully embraced the possibility of a rapid normalization in Middle East energy supply.
From the perspective of physical supply and demand, restoring shipping requires more than vessels passing through the strait; it also involves port loading/unloading, insurance underwriting, transportation arrangements, and upstream production resumption. The U.S. Energy Information Administration (EIA) estimated in its September outlook that global crude inventories have declined by about 400 million barrels this year and expects Middle East export constraints to last for some time, with regional crude production not returning to pre-conflict averages until the second quarter of 2027; this forecast was based on data as of September 3. The downtrend in inventories means less buffer for supply shocks, making new attacks, blockade changes, or negotiation progress more likely to trigger price volatility.
Meanwhile, alternative shipping routes outside Hormuz are also affected by regional conflicts. Houthi attacks on Saudi Arabia have heightened market concerns about the safety of oil facilities and export routes. The economic implication is: even if some crude oil can bypass Hormuz, alternative routes must operate stably to sustainably alleviate global supply tightness. Prolonged delays in reaching a ceasefire could extend a state of high freight rates, high insurance costs, and ongoing inventory drawdowns, transforming energy inflation from a short-term price shock into a longer-term pressure on corporate costs and household purchasing power.
From the pressure of energy inflation to rising yields on long-dated U.S. Treasuries
Persistently high energy prices amplify the impact on financial markets through sustained inflation and monetary policy expectations. On September 16, the Federal Reserve as expected raised rates by 25 basis points to a target range of 3.75%—4.00%, emphasizing inflation remains elevated. The real policy concern is whether energy shocks will continue to transmit to other goods, services, and public inflation expectations—that is, as companies repeatedly pass on transport and input costs, markets may reprice the path of future policy rates and demand more compensation for holding long-term bonds.
This pricing pressure is already evident in long-dated (10 years and above) U.S. Treasuries. On September 25, the 10-year yield intraday reached about 5.23%, the highest since 2007, then eased to about 5.16% as oil prices retreated; the 30-year yield came close to 5.53%, a high since 2004, then settled around 5.49%. Long-end yields are shaped both by expectations for future short-term rates and by term premiums, not 100% oil price-driven, but slow energy supply recovery does increase uncertainty in the inflation trajectory. With the 10-year Treasury yield—"the anchor of global asset pricing"—remaining elevated, there will be knock-on effects for corporate financing, home mortgages, and equity valuations.
Theoretically, the 10-year Treasury yield serves as the risk-free rate (r) in important equity valuation models such as the DCF model. When other parameters (especially expected cash flows in the numerator) haven't changed much—such as during an earnings season vacuum with few positive catalysts—if the denominator level is higher or stays at a historically extreme high above 5%, the valuations of tech stocks closely tied to AI, high-yield corporate bonds, and cryptocurrencies (all considered risk assets) face risks of sharp multiple contraction.
The U.S. dollar is also being supported by relative rate expectations. The September 25 market snapshot showed traders pricing a roughly 66% chance of another Fed hike in October, up from about 58% a week earlier; the U.S. Dollar Index eased with oil prices to about 100.95 but is still on track for a second weekly gain. This means the core market dynamic is not simple risk-off sentiment but a combined effect of energy inflation, the U.S. rate path, and cross-border capital allocation.
From an investment strategy perspective, the support of high oil prices for energy companies' cash flows can coexist with the drag of high interest rates on other asset valuations. For upstream energy firms with stable output, controllable costs, and reliable transport channels, higher realized oil prices may expand operating cash flow and provide more room for debt repayment, dividends, and buybacks; for airlines, transport, and some manufacturers, fuel and logistics costs directly feed into the cost base. For technology and AI infrastructure companies, the main macro effect is higher financing costs and discount rates for future cash flows. Thus, subsequent key observations are whether actual shipping volumes through the straits continue to improve, inventory drawdowns can be halted, and inflation expectations and long-term yields ease simultaneously—these variables will determine how the market reprices energy stocks and growth stocks tied to AI and compute infrastructure.
