DUBAI/WASHINGTON, May 11 (Reuters): President Donald Trump's swift rejection of Iran's response to a U.S. peace proposal sent oil prices surging on Monday amid concerns the 10-week-old conflict will drag on, keeping shipping through the Strait of Hormuz paralyzed.

Days after the U.S. floated an offer in the hopes of re-opening negotiations, Iran on Sunday released a response focused on ending the war on all fronts, especially Lebanon, where U.S. ally Israel is fighting Iran-backed Hezbollah militants.

Tehran also included a demand for compensation for war damage and emphasised Iranian sovereignty over the Strait of Hormuz, Iranian state TV said.

It also called on the U.S. to end its naval blockade, guarantee no further attacks, lift sanctions and end a U.S. ban on Iranian oil sales, the semi-official Tasnim news agency said.

Within hours, Trump dismissed Iran's proposal with a post on social media.

"I don’t like it — TOTALLY UNACCEPTABLE," Trump wrote on Truth Social, without giving further detail.

The U.S. had proposed an end to fighting before starting talks on more contentious issues, including Iran's nuclear program.

Oil ⁠prices jumped more than $4 a barrel on Monday following news of the continued stalemate that leaves the narrow Strait of Hormuz largely closed. Before the war began on February 28, the waterway carried one-fifth of the world's oil and liquefied natural gas flows, and has emerged as one of the central pressure points in the war.

"The oil market continues to trade like a geopolitical headline machine, with prices swinging sharply based on every comment, rejection, or warning coming from Washington and Tehran," said Priyanka Sachdeva, senior market analyst at Phillip Nova.

A map showing the inbound and outbound shipping lanes in the Strait of Hormuz, in addition to the the maritime boundary between Oman and Iran.

Photo from Reuters