US and Iran Fail to Reach Agreement as Oil Market May Hit New Breaking Point

● Despite 21 hours of talks in Pakistan, Iran and the US failed to reach a deal to end the war.

● The US-Iran conflict is entering its fifth week with the Strait of Hormuz blocked and a production cut of ~11 million barrels/day from Gulf producers.

● With no resolution in sight, the risk of a deeper imbalance between oil supply and demand continues to grow.

● The closure of the Strait of Hormuz has not yet been reflected in onshore inventories — estimates suggest this will materialize in full force by the end of April.

● This means there is a risk that the oil market consolidates a price floor of $100/bbl, potentially testing new highs in the coming days.

● Without a resolution by then, the International Energy Agency will need to coordinate a new release of strategic petroleum reserves.

● Strategic reserves buy time but do not solve the problem: the release of 400 million barrels cushions the immediate shock, but the drop in availability is expected to materialize as early as April.

● The recovery of production will be slow: Iraq and Kuwait, for example, will take 3 to 4 months to normalize output, prolonging the impact on global balances even after the conflict ends.

● Geopolitical dynamics remain unfavorable: Iran has an incentive to wait for the market’s breaking point before negotiating, reducing the likelihood of an imminent deal.