US-Iran talks remain deadlocked, experts warn of 'long-term disruption'

As the war between the US-Israel and Iran enters its 60th day, experts warn there is no sign of an end, with negotiations still “deadlocked” amid rising oil prices and inflation.

The US and Israel launched an attack on Iran on February 28. Tehran responded by blocking the Strait of Hormuz – a narrow waterway connecting the Persian Gulf to the Gulf of Oman, through which about 20% of the world's exported oil and gas from the Middle East passes, mainly to Asia and partly to Europe.

Recently, the US imposed its own blockade to stop all Iranian oil tankers, forcing the country to halt production when storage is full and seek solutions.

In the deadlock, oil prices have continuously risen. On Tuesday, WTI crude stood at $100.09 per barrel at 12:30 p.m. ET (4:30 p.m. GMT) – up from $67.02 before the attack – and Brent crude traded at $111.85, up from $72.87 on February 27.

In the US, the average gasoline price hit a nearly four-year high, near $4.18 per gallon ($1.10 per liter) on Tuesday, up from the national average of $2.92 since late February, according to data from the American Automobile Association.

“Negotiations seem deadlocked… and a short-term solution is unlikely,” said Rachel Ziemba, senior fellow at the Center for a New American Security.

“The US economy is more resilient than some others, but ultimately, we will see a global impact on prices,” Ziemba added.

Against this backdrop, the United Arab Emirates (UAE) announced on Tuesday it would leave the OPEC and OPEC+ oil organizations from May 1, a move previously rumored due to its dissatisfaction with OPEC production quotas and disagreement with Saudi Arabia, the de facto leader of OPEC. While the UAE wants to produce and sell more oil, this is not feasible as long as the strait remains blocked, and currently, prices will continue to rise.

Rising prices

The impact on prices is also evident in the US, where the consumer price index last month reached 3.3% annually – the highest since May 2024 – driven by a surge in energy prices.

Bernard Yaros, US economist at Oxford Economics, said the spillover effects from higher energy prices will add to core inflation over the next year.

“This reflects the passing through of higher energy costs to non-energy goods and services, typically peaking three months after the initial energy shock,” Yaros said. “Risks to this estimate are tilted to the upside, as high energy prices will raise short-term inflation expectations, affecting wage-setting behavior.”

Globally, the economic consequences of the conflict are expected to persist even after a ceasefire.

Ben May, Director of Global Macroeconomic Research at Oxford Economics, said in an April 13 report that the firm had lowered its global GDP growth forecast by 0.4 percentage points since early March to 2.4% “because we expect a longer-lasting disruption to shipping through the Strait of Hormuz… But even if there is a ceasefire, it will take time for energy production and transportation to return to normal.”

May forecasts Brent crude prices averaging around $113 per barrel in the current quarter, before falling below $80 per barrel by the end of the year.

Higher oil prices, along with rising gasoline, fertilizer, and agricultural commodity prices, are expected to push global inflation higher, he warned.

For the US, increased uncertainty and household real income pressures add to President Donald Trump's tariffs, which have already driven up prices and slowed hiring and investment over the past year. Oxford Economics cut its US GDP growth forecast from 2.8% to 1.9%, citing “weaker-than-expected activity” at the start of the year.

The prolonged war will also affect the mid-term elections in November. A four-day Reuters/Ipsos poll completed on Monday showed 34% of Americans approve of Trump's performance in the White House, down from 36% in the previous poll from April 15-20.

Most responses were collected before the shooting at the White House Correspondents' Association dinner, where Trump was scheduled to speak, and it is unclear whether the incident changed public opinion.

Trump's standing with the American public has steadily declined since he took office in January 2025, when 47% of Americans supported him. Now only 22% of respondents approve of Trump's handling of the cost of living, down from 25% in the previous poll.

‘Long-term disruption’

David Coffey, supply chain consultant at Catalant, warned the situation will worsen and he is starting to see shelves not fully stocked.

The reason is that about 11% of global maritime trade passes through the strait each year – including minerals and energy-intensive goods like fertilizers, chemicals, petroleum coke, cement, oilseeds, and grains, Scott Lincicome from the Cato Institute explained in a report last month.

The supply disruptions and rising global prices are hurting industries everywhere, including the US.

Coffey listed a long list of sectors sensitive to tightening, including industrial manufacturing, auto parts, pharmaceuticals, and fertilizers.

“Even if fuel supplies restart, it will take weeks to get anywhere. There will be long-term disruption… And there is no sign of an end; things will get worse. Companies are thinking, 'How do we restructure supply?' But there is no substitute for fuel.”