NEW YORK – U.S. President Donald Trump canceled a planned diplomatic mission to Pakistan on April 25, 2026, citing “tremendous infighting and confusion” within the leadership of Tehran. The move comes as global markets struggle to balance a strong appetite for risk against intensifying geopolitical instability.
The cancellation of the trip, which was intended to send envoy Steve Witkoff and Jared Kushner to Islamabad for talks with Iran, coincides with a new diplomatic overture from Tehran. Iran has offered a proposal to the United States to end the current war and reopen the Strait of Hormuz, while suggesting that nuclear negotiations be deferred.
The Strait of Hormuz serves as the world’s most critical oil transit chokepoint. Any prolonged disruption to the waterway creates an immediate supply shock, as a significant portion of the world’s seaborne oil passes through the narrow passage between Oman and Iran. The waterway’s status is closely monitored by signatories to the U.N. Convention on the Law of the Sea, which underpins freedom of navigation for commercial shipping.
A trader works on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., April 16, 2026.
Jeenah Moon | Reuters
While the U.S. delegation’s trip was scrapped, diplomatic channels remain active. Iranian Foreign Minister Abbas Araghchi returned briefly to Islamabad on April 26, 2026, amid efforts by Pakistani leaders to facilitate a rapprochement between Washington and Tehran. President Trump indicated that further discussions could be conducted via telephone, with aides stressing that any deal on oil flows would still require interagency review and consultation with key allies.
Energy Market Volatility and Supply Constraints
The uncertainty surrounding the conflict and the status of the Strait of Hormuz has reinforced a risk premium in energy markets. On April 27, 2026, oil prices rose as traders priced in the possibility of extended disruptions and the risk of further shipping or insurance restrictions in the Gulf.
Crude Oil Price Movement (April 27, 2026):
- Brent Crude: Rose approximately 1% to $106.55 per barrel.
- U.S. Crude: Increased 0.88% to $95.23 per barrel.
Goldman Sachs has revised its Brent oil forecast upward to $90 per barrel by late 2026, increasing it from a previous estimate of $80. The bank cited a slower-than-expected production recovery and delayed normalization of Gulf exports, which are not anticipated to return to normal levels until the end of June, even under a cease-fire scenario.
According to a note published April 27, global inventories in April are estimated to be drawing at a record pace of 11 million to 12 million barrels per day. Invesco estimates that $80 per barrel will likely serve as the floor for Brent this year unless flows through the Strait of Hormuz are fully normalized and major consuming countries tap strategic reserves in a coordinated way.
Equity Resilience and the AI Driver
Despite the energy shock, global equity markets have remained near record highs, recouping losses from the initial outbreak of the war. Analysts attribute this resilience to a conflict between geopolitical risk and the commercialization of artificial intelligence, as investors continue to rotate into technology and semiconductor names tied to AI infrastructure.
Billy Leung, an investment strategist at Global X ETFs, described the current market state as a balance between “geopolitical left tails” and the “AI commercialization right tail,” stating that the technological upside is currently winning.
However, some analysts warn that market positioning has become crowded and sentiment is overextended, particularly in megacap technology stocks. Others, including Rajat Bhattacharya of Standard Chartered, view the current volatility as an entry point for adding to risk assets, anticipating a deal to restore oil flows within weeks and arguing that central banks are unlikely to tighten policy aggressively in response to a supply-driven shock.
Historical precedents for such recoveries include the 1956 Suez crisis. Economist Ed Yardeni noted that while oil prices doubled and stocks fell during that crisis, markets eventually rebounded to new highs once the canal reopened and shipping routes normalized.
On April 27, 2026, Asia-Pacific markets saw gains:
- Nikkei 225 (Japan): Reached a new record high, extending year-to-date outperformance.
- Kospi (South Korea): Reached a new record high, led by chipmakers and AI-adjacent hardware names.
- U.S. Stock Futures: Remained largely stable, signaling a cautious but orderly open on Wall Street.
U.S. oil prices since the start of the year
Bond Markets and Broad Commodity Impacts
Government bond markets remained stable on April 27. The 10-year yield on U.S. Treasurys rose by 1 basis point to 4.322%, while the yield on Japan government bonds of the same duration increased by over 2 basis points to 2.463%. The muted response suggests investors still expect major central banks, including the U.S. Federal Reserve, to prioritize financial stability over reacting to short-term energy spikes.
Beyond crude oil, the broader commodity complex is experiencing disruptions in liquefied natural gas (LNG) and industrial minerals. European LNG benchmarks are currently trading approximately one-third above pre-war levels, with an estimated one-fifth of global LNG supply obstructed.
Benjamin Jones, global head of research at Invesco, noted that disruptions are also impacting the supply of helium, aluminum, and sulphur. These constraints broaden the inflationary impact across industrial supply chains, from electronics manufacturing to chemicals and heavy industry.
Furthermore, the rise in natural gas prices is expected to increase the cost of fertilizer production and agricultural inputs. Market analysts warn that while these pressures may not appear immediately in headline Consumer Price Index (CPI) prints, the lag in the food chain could lead to sustained increases in food prices over the next quarter, intensifying pressure on fiscal authorities and prompting closer scrutiny from competition and price-monitoring agencies. For households, particularly in lower-income import-dependent economies, that could translate into a renewed squeeze on real incomes even if wage growth remains steady.
Foreign Minister Abbas Araghchi has departed Islamabad and is reportedly in Moscow for high-level talks, as regional powers jockey to shape the terms of any cease-fire and the conditions under which normal traffic through the Gulf’s key shipping lanes resumes.
