The proposed ceasefire will probably fail, as the US and Iran disagreed to agree on ending their war despite 21 long hours of negotiations aimed at stopping a conflict that has killed thousands and sent global oil prices soaring since it began over six weeks ago.
The US Vice President, JD Vance, led the delegation that carried out the peace talks in Pakistan’s capital, Islamabad. According to what he told reporters shortly before he left Islamabad, the inability to reach an agreement is more devastating news for Iran than for the United States.
Both countries' delegations have left Islamabad and returned to their home country. While the US says 'RED LINES', Iran says the US's demand is too 'EXCESSIVE'. JD Vance said Iran had chosen not to accept the core goal of the President of the United States: that they should not seek the tools that would enable them to quickly develop a nuclear weapon.
Tasnim News Agency, a semi-official outlet closely linked to the Iranian government, stressed that “excessive” US demands were the main reason the peace talks collapsed. Other reputable Iranian news outlets also reported that both sides made progress on a number of issues but that the Strait of Hormuz and Iran’s nuclear programme remained the main points of disagreement.
The peace talks were arranged after both countries agreed to a two-week ceasefire to create time for negotiations. The peace talks were also among the first high-level direct US–Iranian meetings in more than a decade and the most significant discussions since the 1979 Islamic Revolution.
The Strait of Hormuz Negotiations
Iran is demanding control over the Strait of Hormuz and the collection of transit fees there. But as a minimum, Trump wants free passage for global shipping through the strait. They want ships to coordinate passage with Iranian authorities, describing it as “per-voyage” or “per-barrel” charges.
However, shipping data showed that three fully loaded crude oil supertankers passed through the Strait of Hormuz on Saturday while the peace talks were ongoing in Islamabad. According to Reuters, these ships were the first vessels to exit the Gulf since the ceasefire agreement.
Meanwhile, hundreds of oil tankers remain in the Gulf, waiting and hoping for clearance to leave the Strait during the two-week ceasefire window. It is important to note that although the two-week ceasefire is still ongoing, their departure now depends on several factors and conditions, as no agreement has been reached by both sides.
The Nuclear Weapon Negotiations
Iran is also demanding payments for war reparations, a ceasefire across the region, including Lebanon, and permission to continue its nuclear program. Although Trump’s stated goals have shifted, his bare minimum requirement is the crippling of Iran’s nuclear enrichment programme to ensure it cannot produce an atomic bomb.
Notably, Israel has been bombing Hezbollah militants, a powerful political and military organisation based in Lebanon. Tehran backs the armed members of Hezbollah and demands an end to the fighting in Lebanon. But Israel is saying that conflict is not part of the Iran-U.S. ceasefire.
The Israeli military said it struck Hezbollah rocket launchers overnight between Saturday and Sunday, while black smoke was seen rising from Beirut’s southern suburbs on Sunday. Meanwhile, air raid sirens sounded in Israeli border villages, warning of incoming rocket fire from Lebanon.
The Frozen Assets Negotiations
Iran is also insisting on the return of all assets seized abroad. Before the peace talks begin, an insider in the Iranian government said that the US had agreed to release frozen assets in Qatar and other foreign banks. But a US official has denied these allegations.
Iran has large financial assets held in foreign countries that are restricted (frozen) due to sanctions. The sanctions are mainly imposed by the United States and supported by other financial systems. Around $100 to $120 billion in Iranian assets are frozen globally, many of which are blocked in foreign banks, restricted oil revenues, and escrow accounts under sanctions rules.
The assets are spread across several countries' central bank reserves, including South Korea—which holds billions of dollars in oil revenue; Iraq—which holds energy trade payments; China—which holds large reserves tied to oil exports; Japan; Luxembourg; Europe—which holds bank-held funds under sanctions; and the United States—which holds a smaller portion (~$2 billion in direct US jurisdiction).
US sanctions after the 1979 Iranian Revolution, nuclear-related sanctions in later decades, and restrictions on banking transactions involving Iran’s central bank are the major causes of the frozen assets. These sanctions have long been blocking Iran from transferring money abroad, using foreign reserves, and accessing oil sale revenue in many cases.
The Global Economy Continues to Disrupt
After the disagreement between the U.S. and Iran, Trump ordered the U.S. Navy to enforce a maritime blockade on all traffic entering and leaving Iranian ports in the Strait of Hormuz from exactly 10 a.m. ET Monday. He announced the blockage on his Truth Social on Sunday.
In response to Trump's threats, Iran has promised to retaliate against any military vessels in the strait. Iran’s Islamic Revolutionary Guard Corps (IRGC) warned that any military vessels approaching the Strait of Hormuz would be treated as violating a ceasefire and would face a “harsh and decisive” response, according to Iran’s state-affiliated Fars News agency.
IRGC also stated that “no port in the Persian Gulf and the Sea of Oman will be safe” if its own ports are threatened.
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| The Iranian ports subject to US blockade |
Fars News also reported that the IRGC stated that the Strait of Hormuz is still open for civilian shipping, allowing "harmless passage", as long as vessels follow the applicable rules and regulations. Notably, the Strait of Hormuz isn’t technically closed, and Iran has reportedly been charging up to $2 million per ship as a toll fee.
If Trump's order becomes effective in the Strait of Hormuz, it'll cut off a major financing source for the Iranian government to keep its military operations going. In addition, oil prices climbed back above $100 per barrel, while Asian stock markets declined amid concerns that stalled negotiations and the risk of a potential blockade could further destabilise the global economy.
Brent crude, the international oil benchmark, jumped over 8% in early trading to about $103 per barrel, bringing its total increase since the start of the conflict to roughly 40%. West Texas Intermediate (WTI) also rose by a similar percentage, reaching around $104.7 per barrel—more than 50% higher than pre-war levels after the conflict effectively disrupted access through the Strait of Hormuz.
Meanwhile, financial markets showed signs of strain, with futures for the S&P 500, Dow, and Nasdaq all indicating a weaker opening, while major Asian indices ended the session slightly lower and European markets also traded in the red.
