Key Takeaways:
Pakistan's Prime Minister Shehbaz Sharif on Tuesday urged all parties in the escalating Iran-US conflict to exercise restraint, as the two countries' confrontation over the Strait of Hormuz — through which 20 percent of the world's oil normally flows — risks disrupting global energy markets and deepening a crisis that has already collapsed one ceasefire deal.
"Let me dispel the impression that Pakistan has done hands up, and this is not the case," Tahir Andrabi, spokesperson for Pakistan's Foreign Ministry, said at a news conference Thursday, rejecting suggestions Islamabad had abandoned mediation efforts. "It can be put on the backburner, but it stays. Whenever the parties exhaust the logic of escalation, the formula for peace is there."
The June 17 interim agreement brokered by Pakistan called for a permanent end to hostilities and a reopening of the strait, starting a 60-day negotiating clock toward a final deal on Iran's nuclear program. That process has now halted, though neither side has formally withdrawn, according to regional officials involved in the backchannel efforts. Iran's parliament speaker Mohammad Bagher Qalibaf said the country is not declaring the deal void but that its commitment depends on continued implementation by the United States.
The Strait of Hormuz is Tehran's greatest source of leverage. Iran claims authority to arrange shipping transit through the waterway, while the US insists on free passage and has tried to establish an alternate route along Oman's coast. The fighting resumed after Iran began attacking commercial vessels that ignored its rules, disrupting world energy markets and driving up prices that could pose problems for Republicans in November's midterm elections.
Diplomacy vs. Escalation
Even as fighting intensifies — the US military conducted strikes deeper into Iran on Thursday and fired on a ship accused of breaking the naval blockade — both sides have signaled they remain open to talks. Vice President JD Vance said in a podcast interview that the Trump administration is "not going to bomb and bomb and bomb" and that "diplomacy is another tool." President Donald Trump has repeated threats that Iran returning to the table is the only thing that can avoid US attacks on civilian infrastructure, though he declined to set a timeline.
Iran's Interior Minister Eskandar Momeni, visiting Islamabad on Tuesday, praised Pakistan's role in facilitating the Iran-US memorandum of understanding. He also met with Field Marshal Syed Asim Munir, Pakistan's army chief, with both sides reaffirming close security coordination along their shared border, including efforts to curb smuggling and counter terrorism.
What's at Stake for Markets
The standoff has already injected significant risk premium into crude markets. Iran only needs to hit a ship periodically to create serious problems for insurers and ship captains, reducing traffic through the strait, said Bradley Bowman, a former Army helicopter pilot and now a scholar at the Foundation for Defense of Democracies. That reduced flow exerts economic and political pressure on Washington, especially with midterm elections approaching.
The last time a major shipping chokepoint faced sustained disruption — during the 2019 attacks on Saudi Aramco's Abqaiq and Khurais facilities — Brent crude spiked 15 percent in a single session. While the current situation has not triggered a comparable one-day move, the persistent nature of the threat has kept a floor under prices. Mediators from Pakistan, Qatar and Egypt continue working to resume talks, according to regional officials, though the path to a final deal remains uncertain.
This article is for informational purposes only and does not constitute investment advice.
