But the damage done to the world’s supply chains, especially for energy, will simply not be undone overnight, even if — and it’s a big ‘if’ — the ceasefire holds, analysts say.
“A temporary pause is just that — and both sides of the conflict have established a renewed reputation for unpredictability,” said Simon French, chief economist with London investment bank PanmureLiberum, via X.
Moreover, said Peel Hunt chief economist Kallum Pickering, “Even if this truce marks the genuine end of fighting, some economic damage is already baked in.” He warned that whatever happens from here on, inflation will be higher and growth will be slower in the second half of this year, relative to what was expected in February, before the war started.
While the two sides have agreed to start peace talks in Pakistan on Friday, both still seem far apart on key issues, notably the terms on which oil, gas and chemicals can pass in and out of the Persian Gulf, the most important shipping lane for world energy supply. The two sides are also presenting starkly different takes on whether Iran will be able to continue enriching uranium for its nuclear project.
Within hours of the announcement of talks, Iran had launched fresh attacks on key oil export infrastructure in Saudi Arabia and Kuwait, both U.S. allies, while The Wall Street Journal reported that Iran’s navy is still threatening to sink any ship that tries to pass the Strait of Hormuz at the entrance to the Gulf without negotiating terms. Israel, for its part, continued airstrikes in Lebanon against suspected Hezbollah targets, causing heavy collateral damage.
One key problem stands out: even if shipping is allowed to move relatively freely, the infrastructure that produces and loads the oil and gas onto the ships has suffered real damage, the extent of which is not yet fully known.
