Editor's note: The third round of negotiations between the United States and Iran ended without an agreement after 21 hours. According to a Xinhua News report citing US media on April 12, following the failure of the US-Iran talks to reach an agreement, US President Trump is considering resuming limited military strikes against Iran while simultaneously blocking the Strait of Hormuz.
【Anchor】The situation in the Middle East remains volatile. Last Wednesday, the U.S. and Iran reached a truce agreement, triggering a rebound in gold and stock markets while oil prices fell. After 21 hours of negotiations that started on April 11, the third round of talks broke down without a consensus.
Welcome to DDN Business Insider. Today, we have invited Sun Deguang, Director of the Middle East Research Center at Fudan University; Tan Haotun, financial commentator and part-time professor at Zhongnan University of Economics and Law; and Wu Yongqiang, investment strategy analyst at East Asia Securities. They will continue to focus on the core issues in the U.S.-Iran ceasefire talks and their market impact. Hello everyone!
Mr. Tan, since the negotiations ultimately failed to reach a consensus, and according to the prior agreement, there is still a two-week ceasefire window period. What actions do you anticipate both sides will take during this time, and how do you foresee the situation in Iran evolving?
This negotiation is a precarious balancing act. The U.S. will not back down, and Iran will not concede. The U.S. seeks to assert its power, while Iran is committed to defending its sovereignty. Trump's focus is on saving face, while Iran prioritizes dignity. Neither side will accept the other's demands.
Moreover, the U.S. proposal for talks lacks sincerity. It aims to use the negotiation period to adjust military deployments while pressuring Iran to submit. If Iran resists, the U.S. may escalate military actions. The U.S. military's provocations in the Strait of Hormuz further illustrate this insincerity.
While the efforts of countries like Pakistan are commendable, the U.S. deserves condemnation for its actions.
Do you think, Mr. Sun, that the foundation for this round of talks is actually very fragile? Does this promised two-week ceasefire agreement face a risk of being broken at any time?
At the moment, the U.S.–Iran nuclear talks may experience reversals and could also face some setbacks. The main problem is that there is no strategic trust among the U.S., Iran, and Israel. Any action by either side, every small change or movement, would trigger an extremely sensitive reaction from the other side. Therefore, this two-week ceasefire agreement could be broken at any time.
What are the key points and core issues that both sides are maneuvering around? What are the key variables?
Then the key points can be boiled down to four issues. First, whether the Strait of Hormuz is suitable to be managed by Iran. Second, Iran's ballistic missile issue. Third, Iran's support for regional proxy groups. Fourth, Iran's nuclear program. The key variables include whether Iran is willing to give up its nuclear program, whether it is willing to have the Strait of Hormuz managed jointly by the international community, whether it will give up medium-range ballistic missiles, and whether it will give up support for Hezbollah in Lebanon as well as for the Houthi forces in Yemen. These are likely commitments that the U.S. is demanding from Iran under pressure from Israel. Iran, however, may not be ready to make major concessions. On the U.S. side, the question is: will Iran make concessions first, followed by the U.S. cancelling sanctions? Or will both sides make concessions together? And when will the U.S. actually carry out the cancellation of sanctions against Iran, and which specific sanctions will be cancelled? These are likely to remain highly uncertain.
Alright. In addition, regarding international oil prices: we've seen that as the positions of the U.S. and Iran have been reversing, whether the Strait of Hormuz will remain open for navigation has become a core focus, causing international oil prices to swing sharply. It's also worth noting that, due to the previous closure of the Strait of Hormuz, oil wells in the Gulf oil-producing countries have already been forced to shut down. Even if navigation is restored afterward, oil production will still take several weeks to several months—possibly longer—to recover.Mr. Sun, how do you evaluate the event's impact in the medium and long term on oil prices, the oil industry supply chain, and the energy sector?
If negotiations between the U.S. and Iran can achieve phased results and proceed smoothly, then they would have a suppressing effect on oil prices. But if that doesn't happen, oil prices are likely to rise due to retaliatory action. That's because, as we currently see, oil exports through the Strait of Hormuz have already been severely disrupted.
Under these circumstances, in the medium to long term, oil prices may still remain at high levels. The oil industry supply chain and the broader energy sector could experience "fractures" or disruptions. In this situation, many oil buyers will seek to diversify their sources—buying oil from Russia, Central Asia, and other places—and they may also release strategic energy reserves to curb oil prices. In the past, when oil and natural gas were relatively cheap, many countries leaned more toward traditional energy. But as oil and natural gas prices rise, many countries will develop new energy, including solar power and so on.
Mr. Wu, do you think, based on the market volatility caused by the geopolitical confrontation, things will gradually enter a more stable phase?
In fact, we can all see that the market is still driven by news, and market confidence remains relatively fragile. If some bad news emerges during the negotiation process, it's also not impossible that stocks—whether global equities, U.S. stocks, or Hong Kong stocks—could trigger a relatively large adjustment. However, overall, in terms of resilience, we have been seeing that the Mainland and Hong Kong stock markets have been more defensive and have shown stronger resilience and durability compared with stocks in overseas markets since the outbreak of the U.S.–Iran conflict.
At the beginning, markets also tend to become overly excited about the relevant news, but generally, the positive effect on market sentiment tends to fade relatively quickly. But this time, even Iran is truly willing to pause fighting and negotiate, which has increased the level of excitement in the market. The issue is that, for now, we expect the negotiations may not go smoothly; along the way there will likely be both good and bad news continuing to come out. And even within the same period, it may not necessarily result in a successful negotiation outcome right after the first round.
So for the long term, we are cautiously optimistic about a ceasefire, but we still need to pay attention to the fact that volatility in the global market remains relatively high. Everyone should remain relatively cautious. At this moment, the investment market is still largely driven by news.
Mr. Wu, what is your view on the impact of this situation on oil prices and the energy sector of the Hong Kong stock market?
In the short term, it seems oil still needs to stay at those elevated levels seen before the conflict. Brent crude is expected to trade around USD 90 per barrel—clearly higher than the average level over the past year before the conflict, which was around the low-to-mid USD 70s.
The next thing to watch is how these relatively high oil prices—around USD 90 or above—will affect inflation and economic growth in each country. We need to keep monitoring this. It will also affect corporate earnings: whether costs will rise, whether the global economic outlook will be impacted, and whether demand will change. All of these issues will then feed into the outlook for risk assets—especially stock market performance, valuation, and pricing.
As for the impact on the energy sector, we can see that some oil-related stocks had a noticeable rise after the U.S.–Iran conflict. We don't rule out a fairly sizable correction after tensions between the U.S. and Iran ease. But no one has forgotten that oil prices are still at relatively high levels. For the relevant energy sectors—particularly the petrochemical sector—there could still be support for earnings in the short term, which may make their second-quarter earnings performance relatively resilient.
On the other hand, for some new-energy-related sectors, after this small-scale energy crisis, I think the market will increasingly diversify away from heavy reliance on oil.
【Anchor】OK, thank you to all the guests. That's all for this episode. Remember to follow us on YouTube or download our APP. I'm Yunfei Zhang. Thanks for watching, and see you next time.
Anchor: Laura Cheung | Edited: Kelly Yang, Laura Cheung, Rachel Liu | Translate: Kato Ip | Proofread: Chris Liu
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