The 21-hour negotiation in Islamabad ended without results. On the surface, it was a &#34;failure to reach an agreement,&#34; but what is more noteworthy for the market is that the two sides were not even at the same table—the US sought nuclear commitments, while the Iranian side wanted a comprehensive post-war package. This misalignment dictates that a ceasefire can be extended, but an agreement is difficult to materialize, effectively dashing the market's preferred scenario of a &#34;quick agreement and swift reopening of the Strait.&#34;
Crude oil is most sensitive to this. Oil prices, which had previously retreated due to ceasefire expectations, will likely regain support from risk premiums, with the extent of the rebound depending on the actual duration of the Strait's blockade. Gold's performance will hinge on whether the market re-prices &#34;long-term uncertainty.&#34;
Risk assets now face a stress test. Over the past week, sectors such as aviation, transportation, and some consumer discretionary stocks rebounded on the expectation of &#34;a ceasefire leading to the reopening of the Strait,&#34; but the negotiation outcome exposed the fragility of this chain: the ceasefire holds, but the Strait remains closed. The positive sentiment has been fully priced in, and uncertainty is re-accumulating. The key variable at Monday's market open is: Will the market treat the &#34;failure to reach an agreement&#34; as a one-time disturbance, or will it begin to re-price the baseline scenario of &#34;the Strait cannot be reopened in the short term.&#34;
<h2>21 Hours of Talks, Stopped at the Threshold</h2>
Vance used tough rhetoric after the meeting. According to his account, the US sought explicit commitments from Iran on the nuclear issue: not to pursue nuclear weapons and not to retain the capability to quickly cross that threshold. Iran's Ministry of Foreign Affairs presented a different framework. The agenda it publicly listed included, in addition to the nuclear issue, the Strait of Hormuz, sanctions relief, war reparations, and an end to the comprehensive war against Iran and the region.
According to CCTV News, Vance stated that the US-Iran negotiations failed to reach an agreement primarily because Iran did not make a clear commitment to abandon the development of nuclear weapons. The US demanded that Iran not only refrain from developing nuclear weapons currently but also commit long-term to not acquiring related capabilities and technologies, but &#34;has not seen such clear willingness.&#34;
On the Iranian side, according to Xinhua News Agency citing Iran's Fars News Agency on the 12th, Iran's Foreign Ministry spokesperson said that Iran and the US had reached consensus on some issues, but disagreements persisted on two or three important issues, ultimately preventing an agreement.
Both sides are talking about an &#34;agreement,&#34; but one side wants to first lock in nuclear red lines, while the other wants to discuss broader post-war arrangements. This misalignment is more significant for the market than a simple &#34;talks failed to yield results.&#34;
The New York Times later disclosed more specific sticking points: when the Strait of Hormuz would reopen, how to handle the near-weapon-grade highly enriched uranium stockpile, and whether to release approximately $27 billion in frozen assets. Putting these three issues together clarifies the situation. What is currently stalled is not the final wording or procedural matters, but who makes the first concession on core bargaining chips and to what extent. Such negotiations are unlikely to naturally progress towards a formal arrangement in a short period.
<h2>The Risk in Shipowners' Eyes Has Not Receded</h2>
The Strait of Hormuz had indeed shown some warming signals in the past few days: the US military began preparations for mine clearance, a small number of fully loaded oil tankers sailed out of the Strait, and some empty vessels began attempting to enter the Gulf. It appeared as if the logistics chain was starting to move. However, this seemed more like a probe than a recovery. According to Reuters' tracking, traffic in the Strait remained far below normal, with many ships still waiting.
After the talks concluded, the actual state of the Strait took another step backward. Bloomberg, citing ship-tracking data, reported that two empty supertankers preparing to enter the Persian Gulf turned around as they approached the entrance, with only one passing through the Iranian-approved route into the Gulf. &#34;The reopening of the Strait&#34; itself remains part of the dispute. This detail is significant because it indicates that shipping has not seen a continuous, stable recovery, and the risks perceived by shipowners have not diminished due to the ceasefire news.
<h2>The Discrepancy the Market Needs to Re-evaluate</h2>
The discrepancy the market needs to re-evaluate going forward is, first and foremost: the ceasefire is still in place, the talks have not been announced as terminated, but no formal solution has emerged, and passage through the Strait remains intermittent. The risk premium that retreated too quickly in the past few days will likely return to some extent. Crude oil is the most sensitive, and gold may also receive some support. They may not immediately return to the most extreme pricing levels, but as long as the expectation of a &#34;quick resolution&#34; is removed, prices will move upward again.
On the other hand, assets that found relief in the past few days due to falling oil prices and a recovery in risk appetite will have a less comfortable time. Aviation, transportation, and some consumer discretionary sectors are most sensitive to these changes. The prices of physical crude oil in Europe and Africa have remained high, indicating that the tightness in supply has not disappeared in sync with the decline in futures. The paper market breathed a sigh of relief first, but the physical market did not.
<h2>Inflation and Interest Rates Come Later</h2>
Further down the line, inflation and interest rates will be considered. If the Strait continues to experience this fluctuating state, energy and transportation risks will continue to be transmitted to Inflation Expectations, and duration assets will gradually feel the pressure. However, this layer is still in the future. What is more worth watching at Monday's market open is how much geopolitical risk will be priced back in, and whether the market will reinterpret the &#34;failure to reach an agreement&#34; as a more significant event.
The most realistic assessment right now is probably: the situation has not reverted to the worst-case scenario, nor has it reached true de-escalation. It is stuck in the middle, with ongoing negotiation channels on one side and political arrangements that are slow to materialize on the other. Going forward, watching the rhetoric is certainly important, but watching the ships is more crucial. Whether ships continue to pass through or turn around at the mouth of the Strait of Hormuz will soon tell the market how long this fragile peace can last.

SGDM

In the short term, crude oil will regain support from risk premiums, while whether gold can follow suit depends on the persistence of geopolitical risks; sectors such as aviation and transportation, which previously rebounded on ceasefire expectations, now face correction pressure. In the long term, if the Strait remains blocked, energy costs will be transmitted to Inflation Expectations, and duration assets like bonds will come under pressure. The key market variable is whether the market begins to price in the baseline scenario of "the Strait cannot be reopened in the short term."

- After 21 hours of negotiations, the U.S. and Iran failed to reach an agreement, highlighting their conflicting priorities: the U.S. demands nuclear commitments while Iran seeks broader post-war arrangements.  
- The lack of a formal resolution may lead to renewed uncertainty in the oil market, with prices likely to rebound due to risk premium as the Strait remains partially closed.  
- Overall, the geopolitical situation remains fragile, with fluctuating shipping patterns reflecting ongoing risks in the region.

No Agreement Reached Between US and Iran: What Does This Mean for the Market?