Washington: President Donald Trump's swift rejection of Iran's response to a U.S. peace proposal sent oil prices surging higher 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 hope 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 damages and emphasized 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 in a post on social media.

"I don't like it — TOTALLY UNACCEPTABLE," Trump wrote on Truth Social, without giving further details. The U.S. had proposed an end to fighting before starting talks on more contentious issues, including Iran's nuclear program.

Oil prices jumped $3 a barrel on Monday following news of the continued stalemate, which leaves the narrow Strait of Hormuz largely closed. Before the war, the waterway carried one-fifth of the world's oil supply and has emerged as one of the central pressure points in the conflict.

It is not clear what fresh diplomatic or military steps may lie ahead.

Trump rejects Iran response to US peace proposal as 'unacceptable'