Iran rejects Trump’s Hormuz terms as oil markets await deal-making deadline

Iran formally reviewed a 14-point U.S. peace proposal on 7 May as President Trump declared the war would “be over quickly,” but senior Iranian official Mohsen Rezaee’s public rejection of “unrealistic” Strait of Hormuz reopening terms signals Tehran’s intransigence threatens to collapse negotiations despite White House claims of progress.

The divergence between Trump’s optimism and Iran’s actions became stark when Tehran established a Persian Gulf Strait Authority on 6-7 May to approve transit and collect tolls from shipping, according to PBS NewsHour. Rezaee, top military adviser to Supreme Leader Mojtaba Khamenei, told reporters Tehran “would not let the U.S. reopen the strait with an unrealistic plan,” per CNBC. The new toll authority formalises Iran’s demand for sovereign control over the waterway that handles approximately 20% of global petroleum and liquefied natural gas.

Trump told reporters “they want to make a deal” and characterised recent talks as “very good,” but his timeline clashes with Iranian parliamentary statements. Ebrahim Rezaei, spokesperson for Iran’s foreign policy committee, dismissed the proposed framework as “more of an American wish list than a reality,” citing Al Jazeera. Parliamentary negotiator Mohammad Bagher Ghalibaf declared “Operation Trust Me Bro failed” in reference to U.S. assurances.

The negotiation structure

The 14-point memorandum would require Iran to halt uranium enrichment for 12-15 years — down from the U.S. demand of 20 years but triple Iran’s proposed five-year moratorium, per Axios. The framework proposes a 30-day window for concurrent negotiations on nuclear limits, Strait governance, and asset unfreezing, with gradual reopening of the waterway within that timeframe. U.S. officials briefed on the talks told Axios this represented “the closest the parties had been to an agreement since the war began.”

But the sequencing remains unresolved. Iran insists Hormuz governance must be settled before nuclear concessions begin, while the U.S. proposal treats both issues as concurrent. Tehran’s establishment of the toll authority suggests it views sovereign control as non-negotiable rather than a bargaining chip. The authority would vet and approve all transit — effectively replacing the international freedom-of-navigation principle that has governed the strait for decades.

Market implications

Brent crude stabilised near $100 per barrel on 8 May as investors awaited clarity, but that baseline masks the volatility beneath. Physical crude prices surged near $150 per barrel during April’s peak closure, with middle distillate prices in Singapore reaching all-time highs above $290 per barrel, according to the International Energy Agency. Global observed inventories fell 85 million barrels in March alone, with stocks outside the Middle East Gulf drawn down by 205 million barrels as Strait flows choked to 5% of normal levels.

Goldman Sachs projects Brent will average above $100 throughout 2026 if the closure extends another month, and could reach $120-115 per barrel through Q3-Q4 under prolonged disruption, per OilPrice.com. U.S. gasoline prices stood at $4.56 per gallon on 7 May, up from $2.98 before the war began 28 February, per CNN. Global oil demand contracted 2.3 million barrels per day in April as refineries cut runs by 6 million barrels daily — the IEA characterises the disruption as the largest in the history of the global oil market.

The economic damage extends beyond crude markets. Hundreds of vessels remain bottled up awaiting Strait access, according to the House of Commons Library. Liquefied natural gas flows remain disrupted. Floating storage in the Gulf rose 100 million barrels as producers lacked export capacity. The compounding effects create supply chain stress across petrochemicals, plastics, and manufacturing.

Strategic calculus

Iran’s negotiating position reflects confidence born from military performance. Rezaee warned the U.S. to “prepare to face a graveyard of your carriers and forces, just as the wreckage of your aircraft was left behind in Isfahan,” referencing Iranian air defence successes during the conflict’s opening phase. Parliamentary spokesman Ebrahim Rezaei stated flatly that “Iran will not agree to extend the ceasefire if it does not include Iranian control of the Strait of Hormuz.”

Trump’s repeated threats to resume bombing at “higher level and intensity” if talks fail have not visibly moved Tehran’s position. The White House appears caught between domestic political pressure to end gasoline price spikes and unwillingness to accept Iranian sovereign control over global energy flows. U.S. officials have characterised the toll authority proposal as incompatible with international law and freedom of navigation — positions that leave little room for the compromise needed to reopen the strait within the 30-day framework both sides notionally accept.

What to watch

Iran’s formal response to the 14-point proposal was expected by end of day 7 May but has not materialised publicly. The ceasefire extension timeline becomes critical — if either side allows it to expire without agreement, markets will reprice for resumed hostilities and extended closure. Watch for any U.S. movement on sequencing: if Washington accepts Hormuz governance discussions before nuclear concessions, that signals willingness to pay Iran’s price. Conversely, any Iranian softening on the toll authority concept would indicate Tehran values sanctions relief over energy leverage.

Goldman’s price forecasts assume specific closure duration scenarios. If negotiations extend beyond mid-May without visible progress, expect crude markets to test $120 per barrel as traders price in Q3-Q4 supply constraints. The window for diplomatic resolution narrows with each day the Strait remains effectively closed — inventory drawdowns and refinery cuts compound, making the economic pain of failure rise faster than the political cost of concessions for either side.