NEW YORK | Oil prices surged more than 3.5% to $104 per barrel on Saturday after both the United States and Iran rejected the latest round of proposals aimed at ending their ongoing war, dashing market hopes for a breakthrough that would reopen the Strait of Hormuz and ease one of the worst energy supply shocks in modern history.
The spike comes just days after oil briefly pulled back on reports that the two sides were edging toward a deal. That optimism has now evaporated.
What Happened
Iran delivered its response to Washington’s latest peace proposal through Pakistani mediators, and the answer was a rejection. Iran’s Foreign Ministry described the US terms as excessive demands aimed at subjugating the country rather than achieving a genuine resolution. The Trump administration, for its part, dismissed Iran’s counter-position as unacceptable.
The collapse of the latest round of talks sent markets into immediate reaction mode. Brent crude, the international benchmark, crossed $104 per barrel. US West Texas Intermediate futures for June delivery, which had briefly dipped below $96 on ceasefire optimism earlier this week, snapped back sharply.
This is not the first time this cycle that markets have swung violently on peace talk headlines. Earlier this week, oil suffered what ANZ Research described as a “rollercoaster rise” as doubts emerged over US-Iran peace negotiations. Trump briefly paused “Operation Freedom,” the US naval mission aimed at escorting commercial vessels through the Strait of Hormuz, adding another layer of uncertainty to an already volatile market.
The Strait of Hormuz Is Still Effectively Closed
The root cause of the oil price surge is not the war itself but what the war has done to global energy supply routes.
The Strait of Hormuz is the single most critical oil chokepoint on the planet. Under normal conditions, more than 20% of the world’s oil supply passes through it daily, with hundreds of ships making the transit. Since the US-Israel war against Iran began, that flow has been drastically reduced. According to S&P Global Market Intelligence, on one of the worst days this week, just one ship crossed the strait.
That near-total shutdown of Hormuz is what has driven oil prices up more than 40% since the war started. It is what pushed average US retail gas prices past $4.50 per gallon for the first time since July 2022. And it is what makes every piece of news from the negotiating table, good or bad, capable of moving markets by billions of dollars within minutes.
As long as Hormuz stays closed or restricted, oil prices will remain elevated regardless of what happens diplomatically in the short term.
What $104 Oil Means for American Consumers
The impact of sustained high oil prices is already being felt across the US economy in multiple ways.
Gas prices have surged more than 50% for consumers since the war started. The nationwide average is now above $4.50 per gallon and analysts warn it could approach the all-time high of $5.02 per gallon set in June 2022 if the Strait of Hormuz is not reopened soon. The Nation Magazine reported that if the next round of military conflict escalates, gasoline prices in the US could exceed $7 per gallon.
Jet fuel in North America has spiked approximately 95% since the war began, forcing airlines to raise checked baggage fees and surcharges across the board. On May 2, Spirit Airlines ceased all operations entirely, citing rising fuel costs, despite the Trump administration’s attempts to save the carrier.
Shipping companies including the US Postal Service, Amazon, and FedEx have all implemented fuel surcharges. Borrowing costs have also risen as bond rates climbed during the war, pushing the average 30-year fixed-rate mortgage to 6.44% as of Monday this week.
Trump’s Position and the China Meeting
President Trump has publicly called Iran’s rejection response “totally” unacceptable, though his administration has sent mixed signals throughout the negotiation process. Just days before announcing “great progress” in talks, Trump said he doubted Iran’s latest proposal would be acceptable. He also suggested that internal divisions in Tehran have complicated the negotiation timeline, a claim Iran has denied.
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Looking ahead, Trump is expected to raise the issue of China’s relations with Iran and Russia at a summit with President Xi Jinping scheduled for Beijing on May 14 and 15. China’s position on Iran is considered one of the most significant variables in whether a deal is ultimately achievable. Beijing has maintained trade and diplomatic ties with Tehran throughout the conflict and has significant economic interest in a resolution that reopens Hormuz to global shipping.
Is a Deal Still Possible?
Despite the latest rejection, back-channel communications through Pakistani mediators are continuing. Iran’s Foreign Ministry confirmed it plans to convey its assessment of the US proposal to Pakistan, suggesting the negotiating channel remains open even if no agreement is imminent.
Citi analysts said they expect broader financial markets to stabilize despite recent volatility linked to the Middle East, though the bank warned that the path toward normalization is unlikely to be smooth and that oil prices are likely to remain elevated in the months ahead even in an optimistic scenario.
ANZ Research stated plainly that “the risk of a proposed US peace deal breaking down will likely keep oil markets volatile” for the foreseeable future.
The war has been described by one analyst as “the largest oil supply shock in the history of the oil market.” Whether that supply shock eases depends almost entirely on what happens next in negotiations, and as of today, negotiations have hit another wall.
The Global Ripple Effect
The impact of $104 oil extends far beyond American gas stations.
Canada has seen gas prices rise approximately 30% from March to April. The Philippines declared a state of national energy emergency in late March, the first country to do so since the war began. Ethiopia has had more than 180,000 tonnes of fuel go undelivered in recent weeks, cutting the country’s daily diesel supply in half. Zimbabwe scrapped fuel import taxes and increased ethanol content in petrol to manage shortages. South Sudan, which generates 96% of its electricity from oil, has begun rationing electricity in its capital.
Oil exporting nations are on the opposite end of the equation. The United States, as a major energy producer, has seen exports of crude and petroleum products rise to nearly 12.9 million barrels a day in April 2026. Brazil and Venezuela are also seeing revenue windfalls from the spiked global prices. But for oil-importing nations across Africa, Southeast Asia, and parts of Latin America, the sustained price surge is creating severe inflationary pressure, transport disruptions, and growing social unrest.
What to Watch Next
The Trump-Xi summit in Beijing on May 14 and 15 is now the most significant near-term event for oil markets. If China signals willingness to pressure Iran toward a negotiated settlement, markets will respond immediately. If the summit produces no movement on the Iran question, the current elevated price environment is likely to persist through the summer.
The next round of US-Iran talks, if they resume, will also be closely watched for any sign that the gap between Washington’s terms and Tehran’s position is narrowing.
For consumers, the practical advice from analysts is straightforward: do not expect relief at the gas pump in the near term. With Hormuz still effectively closed and both sides having just rejected each other’s proposals, the conditions that drove oil to $104 today are not going away quickly.
Briefly USA will continue tracking developments in the US-Iran conflict and global energy markets. For ongoing coverage follow our Trending section.
