U.S.-Iran war pauses to give peace talks ‘space’
On July 22, 2026, as daily life continues in the shadow of increasing military tension between the USA and Iran in Tehran, Iran, while air defense systems are activated throughout the night, a woman passes by war-themed graffiti and murals painted on the streets and avenues of the capital Tehran.
Fateme Bahrami | Anatolia | Getty Images
There appeared to be a temporary pause in hostilities between the United States and Iran on Monday after negotiations for a lasting peace hit new hurdles over the weekend.
The US military halted two weeks of offensives on Friday as diplomats sought to create “some space” for peace talks. Iran, which has also refrained from military operations against regional targets in recent days, said it would respond after China’s effort to restart stalled diplomatic efforts in Pakistan.
However, other actors took military action regarding the conflict over the weekend; This highlighted the risk of further escalation and the complex challenges facing negotiators.
The Saudi military has launched an attack on Iranian-backed Houthi targets in Yemen, following the rebel group’s attacks on Red Sea ships in recent days.
Meanwhile, it was reported that the Ukrainian army rammed an Iranian merchant ship in the Caspian Sea, killing one sailor and injuring another. Kiev said the ship was used to transport military cargo supporting Russia’s invasion of the country, while Tehran condemned the attack as a “hostile and criminal act.”
However, welcome news for investors was that hostilities ceased shortly after the White House was said to be considering a “major attack” on Iran. Oil prices fell around 6% early Monday as futures markets pointed to strong performance on Wall Street.
Challenges faced by negotiators
But experts warn that the prospect of a lasting peace faces serious challenges. Negotiators must first agree on contentious issues such as the future of Iran’s nuclear program, sanctions relief and Tehran’s support for proxy groups in the Middle East.
From an economic perspective, the most important negotiating point will be the guarantee of maritime security and the return and normalization of free, two-way traffic flow in the strategically vital Strait of Hormuz.
The strait, through which a fifth of global oil supplies flowed before the conflict, remains closed as the United States maintains an ongoing blockade.
Oman, located on the opposite side of the strait from Iran, has emerged as a key player in the negotiations. An Omani delegation was reportedly in Tehran on Friday and Saturday to negotiate an interim arrangement to manage the passage of shipping through the waterway.
Both sides described the ongoing talks as constructive, but analysts warn that normalization of traffic is unlikely in the short term.
“The main market risk remains on the energy and transportation front,” Deutsche Bank analysts wrote in a note on Monday. he wrote. “Traffic via Hormuz continues to be severely disrupted as the conflict expands towards the Red Sea.”
“This raises the possibility of simultaneous disruption of both the Gulf and Red Sea export routes. So it’s a welcome pause for the main actors, but a fragile one, especially as side wars continue.”
