Iran war stalls peace talks; oil supply crisis deepens

The Iran-US war has entered a critical impasse after ten weeks of escalation. Trump rejected Iran's latest peace proposal as totally unacceptable; Tehran responded by demanding immediate war cessation, sanctions relief, and frozen-asset release. The Strait of Hormuz, responsible for roughly 20% of global oil supply, remains effectively shut. Aramco warned of a 100 million-barrel weekly loss, the largest supply shock since World War II according to J.P. Morgan analysis. This disruption has cascading effects across energy, shipping, agriculture, and currency markets.

Oil prices have surged to levels not seen in years; Brent crude is trading near $160 and some traders reference $200 as plausible under prolonged closure. Airlines reported a 10-20% move higher on false hopes of a ceasefire, only to reverse sharply as talks deteriorated. Jet fuel supplies face acute shortages heading into Northern Hemisphere summer travel season. Fertilizer makers like Mosaic, which depend on Middle East feedstocks, are seeing margins compress despite higher output prices. Shipping companies like Norden are now planning for a full-year Hormuz closure scenario, forcing reroutes around Africa that add weeks to transit times and stretch global logistics capacity.

Emerging markets are feeling acute pressure. India is considering emergency measures to shore up foreign-exchange reserves, including curbing gold and electronics imports and hiking fuel prices. PM Modi made a rare public appeal urging Indians to stop buying gold for a year and conserve fuel. China's central bank warned of imported inflationThe rate at which prices rise across an economy. risks from higher commodities. Thailand's refiner is shifting crude sourcing to Africa and the Americas. Private refiners in China are now requesting permission to cut production rates after being forced to operate at maximum capacity.

Markets have been shrugging off the shock due to AI-driven equity momentumThe empirical fact that winners keep winning over the medium term., but credit and currency markets are showing stress. Asian currencies including the Korean won and Thai baht are sliding. Gilt yields are rising on UK political uncertainty compounded by energy concerns. The risk is that energy costs erode corporate margins faster than consensus estimates, forcing earnings downgrades across non-tech sectors and creating a divergence where AI beneficiaries rally while energy-exposed and consumer names underperform.