US-Iran Talks Fail, Oil Prices Threatened to Rise Again

JAKARTA - Peace talks between the United States and Iran failed to reach a common ground. Reported by The Guardian, Sunday, April 12, the deadlock immediately triggered new concerns in global markets as oil prices and borrowing costs are expected to rise again as many tankers are still stuck in the Gulf region.

A marathon 21-hour negotiation in Islamabad, Pakistan, ended without an agreement. US Vice President JD Vance accused Tehran of refusing to stop its nuclear weapons program. On the other hand, Iranian sources assessed that Washington came up with excessive demands.

Vance left Islamabad on Sunday morning. He said the US team was very clear about the limits that could not be negotiated. According to a report by The Guardian, the statement emphasized that hopes for an immediate end to the war were fading. The conflict erupted on February 28, when the US and Israel launched air raids on Tehran.

The impact is starting to spread. The surge in oil and gas prices has sparked new concerns about inflation, namely the general rise in the price of goods and services. A number of central banks have even signaled that plans to cut interest rates may have to be reviewed. In Ireland, the cost of living has already triggered protests in Dublin in recent days.

Allianz advisor Mohamed El-Erian said uncertainty is now the main problem. According to him, without the continuation of negotiations in the near future, financial markets are likely to respond with rising oil prices and borrowing costs.

"How big the sell-off in the stock market will depend on whether investors still see a reasonable path for continued diplomacy," El-Erian said, quoted by The Guardian.

Throughout the weekend, tensions in the region have also not eased. Israel continues to attack southern Lebanon, amid criticism of the attack on Beirut on Thursday that killed hundreds of civilians and injured many more.

Markets had breathed a sigh of relief after a two-week ceasefire was announced on Wednesday. The deal, brokered by Pakistan, also includes the reopening of the Strait of Hormuz, an important sea route for world oil shipments.

Oil prices fell below $100 a barrel on Wednesday. However, by the end of the week, Brent was still at $94.26 a barrel. This figure is indeed lower than the peak of $119.45 when the war was heating up, but still far above the pre-conflict position, around $72. West Texas Intermediate crude closed at $95.63 a barrel.

Global stock markets also strengthened after a temporary ceasefire was announced. At the weekend, the S&P 500 index in the US almost returned to the level before the attack on Iran began.

Saudi Arabia is trying to dampen market concerns by stating that the east-west oil pipeline and other facilities have been restored after Iran's attacks on energy infrastructure in the Gulf region. The Guardian reported that the Saudi Press Agency said the attack had cut pumping capacity by about 700,000 barrels per day.

Societé Générale economist Wei Yao assessed that the more likely short-term risk was not a major war explosion, but rather a limited retaliatory action that lasted. If that happens, the recovery of oil and LNG flows, or liquefied natural gas, will be slow.

The issue is expected to overshadow the IMF and World Bank spring meetings in Washington that begin Monday. IMF Managing Director Kristalina Georgieva has signaled her agency will present three scenarios. The tone is the same: economic growth weakens, inflation rises.