U.S. stock futures took a significant hit Monday following President Donald Trump’s dismissal of Iran’s latest proposal to negotiate peace in a conflict that has continued for several months. This rejection sent shockwaves through the markets as fears over a prolonged war and rising oil prices took center stage.

Crude oil prices surged approximately 3%, climbing to around $108 a barrel, while futures for major U.S. indices— the Dow, S&P 500, and Nasdaq 100—fell by 0.36%, 0.49%, and 0.98%, respectively, in early trading, according to reports from Reuters.

The downturn in the stock market coincided with Trump’s outright rejection of a peace offer mediated by Qatar, presented during the recent U.N. General Assembly. The proposal included provisions for Iran to reopen the critical Strait of Hormuz and resume nuclear talks in exchange for lifting U.S. naval blockades and easing oil sanctions.

“They want to make a deal, but it is not the deal that I want to make,” Trump explained in a phone interview with Axios over the weekend. “It is what we would have maybe agreed to a year ago. They overplayed their hand.”

Trump’s statements indicate a tough stance against Iran’s overtures, as he suggested he is still considering the possibility of escalating military actions. “I am always thinking about it,” he noted when asked about the potential for renewed airstrikes.

The Strait of Hormuz is a key chokepoint in global oil supply, with about 20 million barrels passing through daily—representing roughly 20% of worldwide oil consumption, as reported by the U.S. Energy Information Administration. Disruption in this area has immediate effects on fuel prices, which can impact household budgets across the nation.

The correlation between rising oil prices and the performance of Wall Street has become increasingly pronounced. Recent data from LSEG revealed that the 60-day correlation is at its highest level since May, indicating that investors’ portfolios and retirement savings are highly sensitive to developments in the Persian Gulf.

Despite Trump’s rejection of the peace negotiation, diplomatic efforts are reportedly still underway. Qatari mediators are expected to hold meetings with both Iranian Foreign Minister Abbas Araghchi and U.S. envoy Steve Witkoff, though sources suggest bridging the gap between both parties may be challenging.

Iran has expressed a continued desire for a diplomatic solution to the ongoing conflict. However, Trump’s U.N. ambassador, Mike Waltz, indicated that the peace offer was dismissed largely due to suspicions that it was a strategic move by Iran to gain concessions without reciprocating.

The stakes surrounding these negotiations are exceptionally high, not only for the U.S. and Iran but for global markets as well. The potential for increased tensions in the Gulf could lead to further volatility in oil markets, exacerbating inflationary pressures already felt by American consumers.

Analysts are closely monitoring how the U.S. diplomatic stance will evolve following this weekend’s developments. With tensions between the U.S. and Iran running high, any sudden changes in policy could significantly impact both financial markets and energy prices.

As the situation unfolds, investors will likely remain anxious about the potential for military escalations. In an environment where economic uncertainty looms large, even minor incidents in the region could have disproportionate effects on both domestic and international markets.

While Trump’s firm stance signals a commitment to a tough negotiating position, it raises questions about the long-term strategy for peace in the region. The recent rejection may stall any hopes for diplomatic resolution, although both sides appear to remain at the table.

Market responses indicate a broader concern about how global conflicts, especially those affecting oil supply, can influence local economies. Strong oil prices can reduce consumer spending power, ultimately affecting economic growth forecasts for the U.S.

Looking ahead, the next steps in U.S.-Iran relations will be critical, not just for the geopolitical landscape but also for the stability of global markets. Investors will be anxiously awaiting further developments from ongoing negotiations and any signs of a change in U.S. military posture.

In conclusion, while President Trump dismissed Iran’s peace proposal, the implications of this decision may ripple far beyond the immediate conflict. Markets are likely to react dynamically to future diplomatic engagements, as the entire situation remains fluid and unpredictable.