According to a report from media citing sources familiar with the matter, US President Trump has rejected Iran's proposed seven-day ceasefire plan and told aides that he expects to resume bombing Iran after the November midterm elections.
Previously, the Iranian government had indicated that it hoped to exchange the reopening of the strait and the resumption of nuclear negotiations for the US lifting its blockade of Iranian ports. However, Iran stated it would not show any flexibility on its nuclear program and would not give up its rights, including uranium enrichment.
The diplomatic process for de-escalating the US-Iran conflict has encountered yet another major obstacle. Whether the Strait of Hormuz can resume stable navigation continues to affect global energy supply and inflation expectations.
The Core Disagreement
The core of this latest major divergence lies in the fact that both sides want to retain their own leverage while demanding that the other side deliver substantive benefits first.
According to sources cited by media and regional mediators, Iran's proposed exchange conditions also include unfreezing some assets and lifting oil export sanctions to ease the impact of the blockade on foreign exchange revenue and the domestic economy. The US side, meanwhile, wants to continue using economic pressure to secure more favorable arrangements on nuclear issues and regional security.
US officials believe that escort operations have already helped some oil tankers pass through the strait, so there is no need to lift the blockade in exchange for navigation at this time.
The resulting deadlock is this: Iran links shipping restoration to economic easing, while the US tries to improve shipping conditions while maintaining the blockade.
The so-called "seven-day plan" also includes a phased implementation framework.
Iranian Foreign Minister Araghchi publicly explained that after the US accepts the plan, relevant measures should first be implemented within four to five days, followed by the resumption of strait passage on the sixth day and the launch of final agreement negotiations on the seventh day.
Therefore, restoring navigation, starting negotiations, and reaching a nuclear agreement are three distinct phases.
Before the news of the rejection emerged, US officials still described contacts through mediators as positive and constructive, indicating that both sides have retained communication channels but remain significantly apart on accepting specific conditions.
Political and Military Constraints
Political and military constraints also make the path forward uncertain.
Trump publicly emphasized that dealing with Iran's nuclear issue would not be driven by electoral interests. However, military assessments privately described by US government officials treat the period after the midterm elections as a possible window for action.
At the same time, the US must also weigh ammunition reserves and the needs of other potential conflicts.
On the Iranian side, diplomatic efforts to ease economic pressure coexist with the Revolutionary Guard's insistence on original conditions and readiness to continue confrontation, further increasing the difficulty of securing internal support and implementation of any plan.
What investors need to watch is whether these positions can translate into executable arrangements, and whether actual energy transport through the Strait of Hormuz and the Bab el-Mandeb Strait, which has recently faced continued threats from Houthi forces, can continue to recover.
Historic $100 Oil Unlikely to Retreat
The historic high of $100 crude oil is difficult to exit — uncertainty over supply recovery is prolonging inflation pressure.
The energy market is repeatedly pricing both "the possibility of a diplomatic breakthrough" and "the reality that supply remains constrained."
On September 25, Brent crude futures settled down 2.1% at $104.32 per barrel; WTI fell 2.3% to $92.41.
The decline that day was influenced by ceasefire hopes and the possibility that the US might restrict diesel exports.
Therefore, the latest news of Trump rejecting the proposal cannot be retroactively cited as the reason for that day's oil price increase.
More noteworthy is that Brent, even after pulling back, remains near historic highs above $100, which is enough to show that the market has not yet fully believed that Middle East energy supply can quickly return to normal.
From a physical supply and demand perspective, restoring shipping requires more than just whether vessels can pass through the strait; it also involves port loading and unloading, insurance underwriting, transportation arrangements, and upstream production recovery.
The US Energy Information Administration estimated in its September outlook that global oil inventories have already declined by about 400 million barrels this year, and projected that Middle East export constraints will persist for some time, with regional crude production not returning to pre-conflict average levels until the second quarter of 2027. The cutoff date for this forecast was September 3.
The declining inventory trend means less buffer against supply shocks and makes new attacks, blockade changes, and negotiation progress more likely to trigger price volatility.
Meanwhile, transportation alternatives beyond Hormuz are also affected by regional conflicts.
Houthi attacks on Saudi Arabia have increased market concerns about the safety of oil production facilities and export routes.
The economic implication is that even if some crude can bypass Hormuz, alternative routes still need to operate stably to continuously ease global supply tightness.
Extrapolating from this, the continued failure to implement a ceasefire arrangement may prolong the coexistence of high shipping costs, high insurance costs, and inventory depletion, turning energy inflation from a short-term price shock into more persistent pressure on corporate costs and household purchasing power.
From Energy Inflation Pressure to Rising Long-Dated US Treasury Yields
Sustained high energy prices will amplify their impact on financial markets through inflation persistence and monetary policy expectations.
The Federal Reserve announced a 25 basis point rate hike as scheduled on September 16, raising the federal funds rate target range to 3.75%–4.00%, and emphasized that inflation remains elevated.
What the policy side is really focused on is whether the energy shock continues to pass through to other goods, services, and public inflation expectations — that is, once businesses repeatedly pass on transportation and input costs, the market may raise its expected future policy rate path while demanding more compensation to hold long-term bonds.
This pricing pressure is already reflected in long-dated US Treasuries of 10 years and above.
On September 25, the 10-year Treasury yield briefly touched about 5.23% intraday, the highest since 2007, before falling to about 5.16% as oil prices retreated. The 30-year Treasury approached 5.53% intraday, the highest since 2004, before settling at about 5.49%.
Long-end yields are influenced by both future short-term rate expectations and term premiums, and cannot be 100% attributed to oil prices. However, the slow recovery of energy supply does increase uncertainty around the inflation path.
As the "anchor of global asset pricing," the 10-year US Treasury yield remaining at high levels will further affect corporate financing, household mortgages, and stock valuations.
From a theoretical perspective, the 10-year Treasury yield is equivalent to the risk-free rate indicator r on the denominator side of the DCF valuation model, an important valuation model in the stock market.
If other indicators — especially cash flow expectations on the numerator side — do not change significantly, such as during earnings season when the numerator side is in a vacuum due to a lack of positive catalysts, then if the denominator level is higher or continues to operate in the historically extreme high range above 5%, valuations of risk assets at historic highs — such as AI-related tech stocks, high-yield corporate bonds, and cryptocurrencies — face the threat of collapse.
The dollar is also supported by relative rate expectations.
A market snapshot on September 25 showed that traders priced about a 66% probability of a Fed rate hike in October, up from about 58% a week earlier. The dollar index fell to about 100.95 that day as oil prices retreated, but was still on track for a second consecutive weekly gain.
This means the core of market trading is not a single risk-aversion sentiment, but the combined impact of energy inflation, the US rate path, and cross-border capital allocation.
Extrapolating from investment strategy, the support that high oil prices provide to energy company cash flows and the constraints that high rates impose on other asset valuations may coexist.
For upstream energy companies with stable production, controllable costs, and reliable transportation channels, higher realized oil prices are expected to expand operating cash flow and provide room for debt repayment, dividends, and buybacks. For airlines, transportation, and some manufacturing sectors, fuel and logistics costs directly enter the cost side.
The main macroeconomic impact on technology and AI infrastructure companies is the rise in financing costs and the discount rate for future cash flows.
Therefore, the most valuable observation points going forward are whether actual strait transportation volumes continue to improve, whether inventories can stop declining, and whether inflation expectations and long-end yields ease in tandem — these variables will determine how the market reallocates valuations between energy stocks and AI infrastructure-related growth stocks.
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