Brent oil tops $103 after Trump dismisses Iran’s peace proposal response

Oil prices were higher Monday after Israeli Prime Minister Benjamin Netanyahu warned that the conflict with Iran was "not over," raising fears that tensions in the Middle East could escalate again and further threatening energy supplies. 

U.S. President Donald Trump, meanwhile, rejected Iran's counteroffer to end the war with the U.S. and Israel. "I have just read the response from Iran's so-called 'Representatives.' I don't like it — TOTALLY UNACCEPTABLE!"

U.S. West Texas Intermediate futures with June delivery advanced 2% to $97.40 per barrel as of 4:48 a.m. ET, paring gains, while international benchmark Brent crude futures with July delivery rose 2.5% to $103.80.

WTI and Brent are both up around 40% since the U.S. and Isreali-led war against Iran started on Feb. 28.

Brent crude prices this year

"There's still nuclear material, enriched uranium that has to be taken out of Iran," Netanyahu said on Sunday in an interview on CBS's "60 Minutes" that is set to air Sunday night. "There is still enrichment sites that have to be dismantled, there's still proxies that Iran supports, there are ballistic missiles that they still want to produce ... there's work to be done."

Asked how the U.S. and Israel would remove the nuclear material, Netanyahu replied: "You go in, and you take it out."

Citi analysts wrote in their latest oil report that prices could rise further if Iran and U.S. do not agree a deal, adding that crude markets have been cushioned by high inventories, strategic petroleum reserve releases, weaker demand in developing economies and intermittent signs of possible de-escalation in the Middle East. 

Citi maintained that risks to oil prices remain tilted to the upside, as Iran retains significant control over the timing and terms of any potential agreement to reopen the critical Strait of Hormuz energy route.

"We assume that the regime will make a deal that reopens the Strait around end-May … but we continue to see the risks skewed towards this timeline being pushed out and/or a partial reopening, which means disruptions for longer."

Felipe Elink Schuurman, CEO and co-founder of Sparta Commodities, said the coronavirus pandemic serves as a good analogy for current developments in oil markets.

"In 2020, on average, we lost 9 million barrels per day of demand versus 2019, which is pretty much the equivalent of what we are losing now in terms of supply. So, the market will have to adjust, and we will have to get to that level of demand destruction," Schuurman told CNBC's "Squawk Box Europe" on Monday.

"Now the question is 'where is that demand destruction going to come?' And unfortunately, it's going to be a situation where the richer countries are going to pay up. Maybe you don't see $200 on crude, but you will see that on a regular basis on products, which is what people consume," he continued.

"You are going to end up in a scenario where poorer countries are going to have a humanitarian crisis, Europe is going to have an economic crisis and the U.S., a political one."

— CNBC's Garrett Downs contributed to this report.