The failure of the US-Iran negotiations in Islamabad raises concerns about global energy shock. U.S. Vice President Jay D. Vance left after 21 hours of talks on April 12, accusing Tehran of refusing to abandon the nuclear program. Tankers remain trapped in the Persian Gulf, while oil prices were set at $94.26 a barrel (Brent). The war began on February 28 with American-Israeli raids, while Israel continues attacks on Lebanon. Governments are concerned about inflation and interest rate increases, with social unrest erupting in Ireland.
Analyticalally:
Oil prices and loan costs are expected to increase further this week, as tankers remain trapped in the Persian Gulf.
The failure of the US and Iran to end up in peace agreement after marathon negotiations has put markets on the lookout for further increases in oil and gas prices.
As written by Guardian, with a large number of oil tankers remaining trapped in the Persian Gulf, the U.S. vice president, J.D. Vance, He attributed the collapse of the talks to Tehran's refusal to abandon its nuclear programme, while Iranian sources responded by saying that «excessive» requirements from Washington.
Vance, who left Islamabad Sunday morning after 21 hours of talks with Iranian officials in Pakistan's capital, he said his team was clear on the «red lines» Its hopes for a rapid end to the war that began on 28 February with American-Israeli air raids in Tehran are weakening.
Vice President JD Vance and Jared Kushner, left, arrivals for a news conference after meeting with representatives from Pakistan and Iran, Sunday, April 12, 2026, in Islamabad, Pakistan. (AP Photo/Jacquelyn Martin, Pool)
Governments are concerned
Governments are beginning to worry about Long-term effects of increasing inflation, after the increase in energy prices. The central banks have indicated that the previous expectations of reducing interest rates should be reviewed. Ireland has experienced social unrest, as protesters took to the streets of Dublin last week and the weekend protesting the increase in cost of living.
Mohamed El-Erian, an advisor to Allianz and former president of Queens’ College, University of Cambridge, said uncertainty would continue to dominate estimates of the economic consequences of the war.
«Although both sides stressed that a quick deal was difficult due to the complexity of the issues, none willingly showed the next step – something that the whole world will focus on, especially as Israel's attacks on Lebanon continued over the weekend»He said.
El-Erian added: «In the absence of a rapid resumption of negotiations, the immediate reaction of financial markets by opening the week will be the rise in oil prices and borrowing costs.
The size of the fall on the stock exchange, where investors were more optimistic than other asset categories, will depend on seeing a realistic prospect of continuing diplomacy.
For the United Kingdom, all this means another blow to the cost of living and less flexibility for budgetary and monetary interventions.».
During the weekend, Israel continued to strike southern Lebanon, amid a conviction for the Beirut attacks on Thursday, which caused hundreds of civilian deaths and many injuries.
The week had begun with Donald Trump's revealing threat to Iran that «A whole civilization will die tonight», through bombings in energy and infrastructure. However, he backed off Wednesday after a two-month truce agreed quickly with Tehran, with Pakistan's mediation, which included opening the Straits of Hormuz.
Oil prices
The oil prices They experienced sharp fluctuations and fell below $100 a barrel Wednesday due to the relief for the truce. At the end of the week they formed lower, with Brent at $94.26 a barrel, from a peak of $19.45 during the war and about $72 before the start of the conflict. West Texas Intermediate closed at $95.63 a barrel.
Global stock markets recovered after the announcement of the temporary ceasefire. By the end of the week, the S&P 500, an index of top American companies, was near levels before the US-Israel attacks in Iran and remained unchanged on an annual basis.
Saudi Arabia tried to prevent further price increases by announcing that the east-west pipeline and other facilities were restored after Iran's attacks on infrastructure in the Gulf.
According to the country's official news agency, the attacks caused a loss of about 700,000 barrels daily in the pipeline's transport capacity, while work continues to fully restore production to the Khurais deposit.
Wei Yao, an economist of Société Générale, said: «Even if the truce is shaken, the most likely short-term scenario is an unstable non-compliance and low intensity retaliation, rather than a direct return to full escalation. For the global economy, this means prolonged disturbances, as oil and LNG flows will slowly normalize».
The effects of the war on the global economy will dominate the spring meetings of the International Monument Fund and World Bank in Washington, starting Monday. IMF Director General Kristalina Georgieva has stated that the fund will present three scenarios, all of which predict lower growth and higher inflation. The IMF is also expected to highlight the impact on the most vulnerable economies.
