Zim GBC News | International Desk<\/p>\n\n\n\n
WASHINGTON\/ISLAMABAD \u2013 The failure of the United States and Iran to reach a peace deal after marathon negotiations has put global markets on alert for further oil and gas price rises, with analysts warning that the collapse of the truce could trigger a new wave of economic turbulence worldwide.<\/p>\n\n\n\n
With large numbers of oil tankers remaining stuck in the Gulf, US Vice-President JD Vance blamed the collapse of the talks on Tehran’s refusal to abandon its nuclear weapons programme, while Iranian sources hit back at “excessive” demands from Washington.<\/p>\n\n\n\n
Vance, who left Islamabad on Sunday morning after 21 hours of talks with Iranian officials in the Pakistani capital, said his team had been very clear on its red lines as hopes faded of a quick end to the war that began on 28 February with US and Israeli airstrikes on Tehran.<\/p>\n\n\n\n
“We have been firm on our non-negotiable positions. Iran must abandon its nuclear ambitions,” Vance told reporters before departing.<\/p>\n\n\n\n
Iranian officials, speaking on condition of anonymity, accused Washington of making “excessive and unrealistic demands” that made a sustainable agreement impossible.<\/p>\n\n\n\n
Global economic jitters<\/p>\n\n\n\n
Governments have grown increasingly concerned at the long-term impact of rising inflation following a sharp jump in oil and gas prices. Central banks have indicated that previous expectations of interest rate cuts would need to be urgently re-examined.<\/p>\n\n\n\n
In Ireland, social unrest has erupted as protesters took to the streets of Dublin last week and throughout the weekend over the rising cost of living.<\/p>\n\n\n\n
Mohamed El-Erian, an adviser to German insurer Allianz and a former president of Queens’ College, University of Cambridge, said uncertainty would continue to dominate assessments of the financial impact from the war.<\/p>\n\n\n\n
“While both parties stressed that a quick agreement was too much to hope for given the issues involved, neither readily indicated the next step \u2013 something the whole world will be focused on, especially as Israel’s attacks on Lebanon continued throughout the weekend,” El-Erian said.<\/p>\n\n\n\n
He added: “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.”<\/p>\n\n\n\n
“For the UK, all this translates into another hit to the cost of living and less flexibility for both fiscal and monetary policy responses,” El-Erian warned.<\/p>\n\n\n\n
Oil price volatility<\/p>\n\n\n\n
Oil prices fluctuated wildly during the week. Brent crude fell below $100 a barrel on Wednesday amid relief about the two-week truce that had been hastily agreed, brokered by Pakistan. The truce had included the reopening of the strategic Strait of Hormuz.<\/p>\n\n\n\n
Brent crude ended the week at $94.26 a barrel, compared with a peak of $119.45 during the war, and about $72 a barrel before the conflict began. West Texas Intermediate crude finished the week at $95.63 a barrel.<\/p>\n\n\n\n
Global stock markets had rebounded after the temporary ceasefire was announced, but analysts expect renewed volatility following the collapse.<\/p>\n\n\n\n
Saudi Arabia attempted to head off a possible increase in oil prices by announcing that its east-west oil pipeline and other facilities had been restored following attacks by Iran on infrastructure across the Gulf.<\/p>\n\n\n\n
Citing an energy ministry statement, the official Saudi Press Agency reported that the attacks had led to a “loss of approximately 700,000 barrels per day of pumping capacity through the east-west pipeline” and that work was under way to restore full production capacity at the kingdom’s Khurais oilfield.<\/p>\n\n\n\n
‘Lasting disruptions’ ahead<\/p>\n\n\n\n
Wei Yao, an economist at Societ\u00e9 G\u00e9n\u00e9rale, said: “Even if the ceasefire frays, the more likely near-term outcome, in our view, is messy non-compliance and low-level retaliation near-term, rather than an immediate return to full-blown escalation.”<\/p>\n\n\n\n
“For the global economy, this means lasting disruptions, as oil and LNG flows would normalise only slowly,” Yao added.<\/p>\n\n\n\n
IMF warning<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
IMF Managing Director Kristalina Georgieva has indicated that the fund will present three scenarios this week, all of which predict lower economic growth and higher inflation. The IMF is also expected to highlight the disproportionate impact on vulnerable and developing economies, including those in Africa.<\/p>\n\n\n\n
Meanwhile, over the weekend, Israel continued to strike southern Lebanon amid widespread condemnation of its attacks on Beirut on Thursday that killed hundreds of civilians and injured many more.<\/p>\n\n\n\n
The week had started with former US president Donald Trump’s apocalyptic threat to Iran that “a whole civilisation will die tonight, never to be brought back again” by bombing the country’s power stations and bridges. But he pulled back from the brink on Wednesday after the truce was agreed.<\/p>\n\n\n\n
With diplomacy in tatters, the world now watches anxiously to see whether the region plunges back into full-scale war \u2013 and how much more pain consumers will feel at the fuel pump.<\/p>\n\n\n\n
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