Iran Peace Talks Put the Strait of Hormuz at the Center of Global Market Risk

The current negotiations are about more than ending a military conflict; they are about reopening one of the world’s most important energy arteries. Reuters reported that Pakistan is trying to accelerate U.S.-Iran diplomacy, with Pakistan’s army chief potentially traveling to Tehran and its interior minister already visiting. Iran says it is reviewing Washington’s latest responses, while Trump has said talks are in the “final stages” but warned that the U.S. is ready to act again if Tehran does not agree to a deal.

Hormuz is the reason this conflict has become a global finance story rather than only a geopolitical one. The Strait of Hormuz connects the Persian Gulf to the Gulf of Oman and the Arabian Sea, and the U.S. Energy Information Administration said oil flows through the strait averaged 20 million barrels per day in 2024, equal to about 20% of global petroleum liquids consumption. The EIA also noted that around one-fifth of global LNG trade passed through Hormuz in 2024, mostly from Qatar, making the strait critical for both oil and gas markets.

Markets are reacting to every sign of progress or deadlock. Brent crude rose to around $105 a barrel on Thursday after falling sharply the previous session when traders priced in lower immediate escalation risk. Analysts quoted by Reuters said investors are not ready to remove the supply-risk premium while Hormuz remains central to global energy flows. U.S. crude and gasoline inventories have also fallen, and the U.S. Energy Information Administration reported a nearly 10 million barrel withdrawal from the Strategic Petroleum Reserve last week, the largest drawdown on record.

Iran’s position adds another layer of uncertainty. Tehran has announced a “controlled maritime zone” in the Strait of Hormuz and said vessels would need authorization from a new authority to transit the area. Some tankers have begun moving again, including Chinese and South Korean-linked cargoes, but Reuters reported that traffic remains far below pre-war levels: Iran claimed 26 ships crossed in 24 hours, compared with 125 to 140 daily passages before the war. This suggests that partial reopening does not yet equal normalization, especially if Iran keeps using access to Hormuz as a negotiating tool.

The financial market impact extends beyond crude prices. Gulf equities rose on hopes of a U.S.-Iran deal, while energy companies and regional infrastructure plans are adjusting to the possibility that Hormuz may remain unreliable even after fighting stops. ADNOC said the UAE’s new crude pipeline bypassing the strait is about 50% complete, and Reuters reported that global oil flows may take months after the war ends to recover to most of their pre-conflict levels. The broader lesson for investors is clear: as long as Hormuz remains politically contested, oil, shipping, inflation expectations, Gulf equities, and central-bank calculations will all remain tied to the outcome of U.S.-Iran diplomacy.