Trump says Iran cease-fire on life support, oil prices surge higher

Oil markets jolted higher as President Donald Trump said the cease-fire with Iran was “on life support,” a warning that deepened fears the 10-week war could keep snarling shipping through the Strait of Hormuz and drive up costs for households and businesses.

Trump said on Monday that Iran’s counterproposal to a U.S. peace plan was “unacceptable,” and Reuters reported that he also dismissed Tehran’s response as “stupid.” The remarks unsettled investors because the conflict has already raised the risk premium in energy markets and made traders less confident that the truce can hold. The immediate concern is practical, not abstract: if tankers and cargoes face more delays in the Strait of Hormuz, the world’s most important oil transit chokepoint, fuel costs can move quickly from global markets into U.S. gas stations, trucking bills and retail prices.

Brent crude settled at $104.21 a barrel on Monday after rising 2.9 percent. By Tuesday, May 12, it was trading above $104 and was reported around $107.45 a barrel, a sign that the market is still pricing in the risk that the conflict broadens or the cease-fire unravels. Traders have been watching the war not just for battlefield developments but for any sign that shipping lanes could be paralyzed, especially as Asia and the Middle East rely heavily on flows through the strait.

The price shock is already showing up in the inflation data. The U.S. consumer price index rose 3.8 percent in April from a year earlier, the fastest annual pace since May 2023, with higher energy and gasoline prices tied in part to the Iran war. That matters because fuel is embedded in nearly every part of the economy, from freight and air travel to the cost of moving food and consumer goods to store shelves.

Economists say the inflation reading is likely to reinforce expectations that the Federal Reserve will leave interest rates unchanged for a while. For now, the market is reacting less to hopes for peace than to the possibility that the cease-fire may not survive. With Brent holding well above $100 and the Strait of Hormuz still vulnerable, the conflict is pushing geopolitical risk straight into the prices Americans see at the pump and in stores.