US-Iran Peace Talks Collapse, Sparking Fears of Prolonged Energy Crisis

The collapse of peace talks between the US and Iran has heightened fears of a prolonged energy shock, with markets bracing for further oil and gas price rises. The talks, which took place in Islamabad, ended without a deal after the US vice-president, JD Vance, blamed Tehran’s refusal to abandon its nuclear weapons programme.

Vance stated that his team had been clear on its red lines, and Iranian sources hit back at “excessive” demands from Washington. The failure of the talks has put large numbers of oil tankers stuck in the Gulf, and the US has announced plans to blockade the strait of Hormuz.

Analysts predict that oil prices will stay high in the second quarter, above $100 a barrel, before easing in the second half of the year. Tony Sycamore, market analyst at IG Australia, said: “Unless a sudden U-turn emerges, energy markets are set for a rocky open when regular trading resumes tomorrow morning.”

Impact on Global Economy

The war’s impact on the global economy will dominate the International Monetary Fund and World Bank’s spring meetings in Washington, which start on Monday. The IMF’s managing director, Kristalina Georgieva, has indicated that the fund will present three scenarios, all of which predict lower economic growth and higher inflation.

Mohamed El-Erian, an adviser to the German insurer Allianz, said uncertainty would continue to dominate assessments of the financial impact from the war. “Absent a swift resumption of negotiations, the immediate reaction of financial markets when they open for the trading week will be to push oil prices higher and borrowing costs higher,” he said.

The US president, Donald Trump, has announced plans to start “BLOCKADING any and all Ships trying to enter, or leave, the Strait of Hormuz”. Trump also warned that any Iranian who fires at the US or at “peaceful vessels will be blown to hell”.

The Iranian deputy parliament speaker, Haji Babaei, has stated that the shipping passage is “completely” under Iranian control, and tolls must be paid in the country’s currency, rials. The situation has sparked concerns over the long-term impact of rising inflation, with central banks indicating that previous expectations of cuts in interest rates would need to be re-examined.