Washington: The United States and Iran held separate talks with mediators on Monday as diplomatic efforts continued to end the conflict, while uncertainty over the Strait of Hormuz pushed oil prices higher and added pressure to financial markets.
The latest contacts took place on September 28 as mediators worked to bring Washington and Tehran closer to an agreement.
Iranian Foreign Minister Abbas Araqchi remained in New York and held discussions with Qatari mediators. US officials also spoke separately with mediators, while President Donald Trump said US officials had been in contact with those working to end the conflict.
The talks are expected to focus on an amended version of a seven day proposal presented by Iran last week on the sidelines of the United Nations General Assembly. Iran's proposal calls for an end to hostilities, the release of frozen Iranian assets, relief from sanctions on its oil exports and the reopening of the Strait of Hormuz.
Iran has also called for the lifting of US restrictions on its ports and a return to negotiations over its nuclear programme. The nuclear issue remains an important part of Washington's position in any possible agreement.
Trump has publicly said that he rejected Iran's proposal. However, Araqchi has said that Iran has not received a formal US rejection through the mediation channel and is still waiting for Washington's response. This leaves the diplomatic process open, although there is no confirmed ceasefire or final agreement between the two countries.
The situation around the Strait of Hormuz remains a major concern for the global economy. The waterway is one of the world's most important routes for oil and gas shipments. Although some oil and liquefied natural gas vessels continue to pass through the strait, shipping traffic has fallen sharply and remains highly uncertain.
Iranian state broadcaster IRIB has also reported that Iranian forces seized two light vessels and detained 50 people near Qeshm Island and Minab, accusing them of violating Iranian regulations. Details about the vessels and those detained were not immediately available.
The continuing disruption has kept oil prices above $100 a barrel. On Tuesday, September 29, Brent crude was trading at around $106.60 a barrel, while US West Texas Intermediate crude remained above $93 a barrel.
Higher oil prices are increasing concerns about inflation in the United States and other major economies. Investors are also watching US interest rates closely because higher energy costs could make it more difficult for central banks to reduce borrowing costs.
The US bond market has also come under pressure. The yield on the 10 year US Treasury note rose to about 5.27 percent on Tuesday, reaching its highest level in 19 years. Rising bond yields have added to pressure on shares as investors reassess inflation and interest rate expectations.
US and Asian stock markets have also been affected by the uncertainty. The combination of higher oil prices, rising bond yields and concerns over the wider economic impact of the conflict has increased volatility in global financial markets.
India has also felt the impact. The Sensex fell 1,124 points on Monday, while the Nifty 50 dropped about 360 points. Foreign institutional investors were net sellers of about Rs 5,353 crore in Indian equities during the session.
The Indian rupee has faced further pressure because higher crude prices increase the country's import costs. The rupee closed at around Rs 95.98 against the US dollar on Monday and breached the Rs 96 level during trading on Tuesday.
India is particularly exposed to a prolonged rise in oil prices because it imports nearly 90 percent of its crude oil requirements. A sustained increase in energy costs can raise the country's import bill and add to inflationary pressure. It can also put pressure on the rupee and affect corporate earnings and economic growth.
The immediate direction of the conflict remains uncertain. Diplomatic channels remain active, but there is no confirmed ceasefire or final agreement between Washington and Tehran.
The outcome of the talks, particularly over the Strait of Hormuz, sanctions and Iran's nuclear programme, will be closely watched by governments, energy markets and investors around the world.