The fragile ceasefire between the U.S., Israel, and Iran is on the brink of collapse, with recent reports indicating that airstrikes could resume within days.
This tense situation stems directly from the breakdown of recent negotiations. The initial ceasefire, established in early April, brought a temporary calm and hopes for stability in the Persian Gulf. However, diplomatic efforts throughout May have faltered, pushing the region back toward conflict.
Let's trace the key steps that led to this point. First, the U.S. rejected Iran's latest ceasefire proposal in mid-May, with President Trump calling the deal on 'massive life support'. While he publicly 'paused' a planned retaliatory strike, the move was seen as keeping military options readily available. Second, and perhaps more critically, Iran’s Supreme Leader directed that its stockpile of near-weapons-grade uranium must remain within the country. This hardened a core U.S. demand for its removal and significantly narrowed the space for a peaceful resolution. Although there has been 'slight progress' through indirect talks, it hasn't been enough to remove the immediate threat of military action.
Renewed conflict carries significant economic consequences, primarily for the global oil market. The Strait of Hormuz, a critical chokepoint for global energy supplies, would again be at risk. Even during the ceasefire, war-risk insurance premiums for oil tankers transiting the strait remained exceptionally high—up to ten times pre-war levels. These high costs act as a deterrent to shipping, effectively constraining oil supply even without direct attacks.
If strikes resume, this supply disruption would intensify. Analysts estimate that even a limited conflict could push Brent crude oil prices from a baseline of $95 per barrel to over $107, with a wider campaign potentially sending prices toward $120. Such a price shock would ripple through the global economy, raising fuel and transportation costs and frustrating central banks' efforts to bring inflation under control. The situation remains highly volatile, with the world watching to see if diplomacy can prevail over the drumbeat of war.
- Strait of Hormuz: A narrow waterway between the Persian Gulf and the open ocean, through which a significant portion of the world's oil supply passes. Its closure would cause a major global energy crisis.
- Brent Crude: A major benchmark price for oil purchases worldwide. Its price is a key indicator of global oil market conditions.
- War-risk insurance premium: Extra insurance coverage required for vessels traveling through dangerous areas. High premiums can make voyages unprofitable, effectively reducing shipping capacity.