US-Iran negotiations stall as Strait of Hormuz blockade drives global energy costs to four-year highs

Negotiations between the United States and Iran remain stalled as the conflict initiated on 28 February enters its 60th day. The deadlock has resulted in a dual blockade scenario, with Tehran restricting approximately 20 per cent of global oil and gas exports through the Strait of Hormuz, while the United States has simultaneously imposed a counter-blockade on Iranian oil shipments. This strategic impasse has driven global crude prices to record levels, with Brent trading at $111.85 and West Texas Intermediate reaching $100.09.

The immediate impact on domestic markets in the United States has been severe, with petrol prices climbing to nearly $4.18 a gallon. This represents the highest average price in nearly four years, a sharp increase from the national average of $2.92 recorded since late February. The surge in energy costs has directly contributed to a rise in the US consumer price index to 3.3 per cent annually, the highest level since May 2024, according to recent data.

Amidst the escalating crisis, the United Arab Emirates announced it will withdraw from OPEC and OPEC+ effective 1 May. However, analysts note that this decision is currently infeasible given the closure of the Strait of Hormuz, which prevents the UAE from producing and selling additional oil to offset the market disruption. Experts warn that even if a truce is eventually reached, the supply disruptions through the strait will cause long-term global economic damage, pushing up inflation across manufacturing and agriculture sectors.

Oxford Economics forecasts that Brent oil prices will average $113 per barrel in the current quarter before falling to just under $80 by year-end. Despite this potential decline, the firm warns that spillover effects from higher energy costs will bleed into non-energy commodities and services, peaking roughly three months after the initial shock. Consequently, the organisation has downgraded its US GDP growth forecast to 1.9 per cent, citing weaker activity and the compounding effects of tariffs and energy inflation.

Beyond energy, the closure of the strait is affecting a broader range of essential goods. Supply chain consultant David Coffey reports visible shortages on shelves for commodities such as fertilisers, chemicals, and grains. This is attributed to the fact that approximately 11 per cent of global maritime trade transits the strait annually, including minerals and energy-intensive goods. A disruption in these supply lines is expected to hurt industries ranging from industrial manufacturing to pharmaceuticals.

Political ramifications are also emerging, with a Reuters/Ipsos poll indicating a decline in President Trump's approval rating. Only 22 per cent of respondents approve of his performance on the cost of living, down from 25 per cent in a prior survey. As the conflict continues with no end in sight, the combination of prolonged shipping disruptions and rising commodity prices poses significant risks to household real incomes and global trade stability.