M. Juan Szabo [1] y Luis A. Pacheco [2]
On the eve of the deadline President Trump had set for the Iranian regime — threatening destruction unless it stopped blocking the Strait of Hormuz — and amid a disinformation campaign on both sides of the conflict, the Pakistani government's intervention secured a two-week (15-day) ceasefire that took effect on April 8, 2026.
The last-minute agreement aims, above all, to reduce the intensity of the threats of an Armageddon in the Middle East, reopen free transit through the Strait, and create space for definitive peace negotiations after more than a month of increasingly dangerous hostilities. The truce is initially set for 15 days, running through April 22. Pakistani Prime Minister Shehbaz Sharif brokered the agreement, and both parties have designated Islamabad, Pakistan, as the venue for negotiations toward a "lasting" peace agreement.
Fragility of the Agreement
As is to be expected in situations of this kind, the agreement is highly fragile, and several violations have already been reported. One of the least clear elements of the situation is that Israel apparently did not participate in the negotiations and was only informed at the last minute, having continued its campaign against Hezbollah in southern Lebanon. Iran protested loudly and, together with Pakistan, maintains that Lebanon was part of the deal. However, without Israel at the negotiating table — despite being the third party to the conflict — that claim has little basis. Tehran has warned that it will not negotiate unless the agreement includes Lebanon.
The hydrocarbon demand from the Persian Gulf by China, India, Pakistan, South Korea, and Japan, along with U.S. domestic political considerations related to gasoline prices and Iran's interest in preserving its military arsenal and infrastructure, are probably the most significant variables in avoiding a prolonged conflict.
The Market Question: Is There Really a Ceasefire?
The key question that oil markets are asking is whether there is, in fact, a ceasefire, given that the Strait of Hormuz has not been reopened to shipping. Attacks on energy infrastructure in the Middle East continue to affect Saudi Arabia, and the Lebanese conflict keeps escalating. Nevertheless, oil recorded its largest weekly decline since July 2025; the market appears to be pricing in the mutual need of both parties to reach an agreement that keeps the Strait operational.
On Thursday the 9th, maritime traffic through the Strait was well below 10% of normal volume despite the ceasefire announcement, as Tehran reaffirmed its control by warning ships to sail only through its territorial waters. It is worth noting that the traditional shipping lanes run mostly through Omani territorial waters and are protected by the United Nations under international maritime law agreements.
Meanwhile, Russia and Ukraine agreed on a 32-hour temporary truce for Orthodox Easter. The ceasefire took effect on Saturday, April 11, at 4:00 p.m. local time and was scheduled to end at midnight on Sunday, April 12.
Several countries — including China, India, the United States, and Japan — have drawn on their strategic reserves to mitigate the supply shock, a measure that is at best palliative.
Drilling activity resumed its decline in both the United States and Canada, limiting the potential for a reactive rebound in production.
GEOPOLITICS AND FUNDAMENTALS
The Islamabad Negotiations
Direct, face-to-face negotiations between the United States and Iran began on Saturday, April 11, 2026, in Islamabad, Pakistan. These historic talks, mediated by Pakistan, represent the highest-level meeting between the two nations since the Islamic Revolution of 1979.
The American delegation was led by Vice President J.D. Vance and included Special Envoy Steve Witkoff and President Trump’s advisor and son-in-law Jared Kushner. Mohammad Bagher Ghalibaf, Speaker of the Iranian Parliament, led the Iranian delegation, which comprised 71 members, including Foreign Minister Abbas Araghchi and negotiator Ali Bagheri Kani. On the Pakistani side, Prime Minister Shehbaz Sharif, Army Chief Asim Munir, and Foreign Minister Ishaq Dar served as mediators.
Ahead of the talks, President Trump had stated that Iran’s 10-point proposal for a more comprehensive peace agreement would serve as a "viable basis for negotiation." However, that proposal includes a series of demands that appear to conflict with the U.S. 15-point framework.
Key Sticking Points in the Negotiations
The two most contentious issues, even before negotiations began, are:
• The unconditional opening of the Strait of Hormuz, as demanded by Trump, while Iran seeks to maintain continuous control over transit through the Strait and collect navigation tolls.
• A ceasefire in Lebanon is an Iranian precondition for any lasting peace agreement following Israeli strikes on Hezbollah. The United States and Israel contend that the Lebanese front is separate from the ceasefire between Iran and the United States. Iran insists that lasting peace must involve both the United States and Israel, and adds to this the complete withdrawal of military forces from the region.
The Trump Administration also seeks to ensure that Iran does not develop nuclear weapons, while aiming to limit its ballistic missile program. For its part, Iran seeks international recognition of its right to enrich uranium for civilian purposes and the release of $120 billion in frozen assets, in addition to broad sanctions relief, before any final agreement is reached.
Outcome of the Initial Round
Although initially reported as indirect, officials confirmed that direct, trilateral, face-to-face talks were held at the Serena Hotel in Islamabad. After extended meetings, Vice President Vance reported that no agreement had been reached and emphasized that the United States had put its best offer on the table.
Pakistani Foreign Minister Ishaq Dar said his country would attempt to facilitate new dialogue between Iran and the United States in the coming days: “The parties must maintain their commitment to the ceasefire.”
Shipping Routes Through the Strait
Iran’s Islamic Revolutionary Guard Corps published revised navigation charts. They ordered ships to sail through Iranian waters around Larak Island to avoid the risk of naval mines on the usual routes through the Strait, according to the semi-official Iranian news agency Tasnim (see attached map). The maps show that shipping is being diverted entirely away from Omani territorial waters and into Iranian waters, with Larak Island serving as a checkpoint — and possibly a toll station.
Hundreds of tankers and other vessels have been trapped in the Persian Gulf since the war with Iran began on February 28, reducing global oil supply by 20% — the largest supply disruption in history — though the markets seem reluctant to absorb this reality fully.
The reduction in global supplies due to Hormuz restrictions is set to exceed 400 million barrels and is reflected in declining inventories, primarily in Asia. Globally, inventories have fallen by 3%; however, when operational inventories are factored in, that figure rises to approximately 7%, according to our calculations.
Escalation: Trump’s Naval Blockade
In a new twist, President Trump reacted to the breakdown of negotiations in Islamabad by announcing that he would impose a naval blockade at Hormuz and would detain vessels that had paid a toll to the Iranians. The apparent objective of this blockade is to prevent Iran from exporting oil while it continues to block other countries' exports.
Global Responses to the Supply Shock
Worldwide, a series of events has helped mitigate the acute supply-demand imbalance, particularly through the management of strategic reserves. However, military actions have negatively impacted installations across the region:
• Iranian missile and drone attacks have reduced Saudi Arabia’s oil production capacity by approximately 600 thousand barrels per day (MBPD) and have reduced the flow through its East-West pipeline by approximately 700 MBPD, according to the Kingdom’s Ministry of Energy. The East-West system has become one of Saudi Arabia’s main export routes, transporting crude from the Persian Gulf to the Red Sea and bypassing the Strait of Hormuz. One of the pipeline’s pumping stations was struck, limiting its flow. At the same time, direct damage to upstream facilities disrupted barrel supply: the Manifa field lost approximately 300 thousand barrels per day (Mbpd) of capacity, and prior damage at Khurais accounts for an additional 300 Mbpd. Saudi Arabia’s Ministry of Energy announced on Sunday that its East-West pipeline and other facilities had been restored following Iranian attacks on targets across the Gulf.
• Indonesia asked its liquefied natural gas (LNG) and crude oil producers to prioritize the domestic market to secure its own oil and gas supply. The government will not issue export approvals for LNG this year except for cargoes already under contract. The government also expects to receive additional LNG cargoes later this year from the Bontang plant, supported by gas production from fields operated by Italian company ENI.
• Japan’s largest power generation company, Tokyo Electric Power, expects the world’s largest nuclear reactor, located at Kashiwazaki-Kariwa, to resume commercial operations on April 16 — a boost toward reducing the country’s costly dependence on LNG imports.
• In a display of policy adaptability, Mexican President Claudia Sheinbaum announced plans on Wednesday to exploit unconventional natural gas deposits in an effort to reduce her country’s dependence on foreign energy, at a time when the war with Iran is disrupting global energy markets. Sheinbaum avoided using the terms “hydraulic fracturing” or “fracking,” describing it instead as a drilling method for extracting oil and natural gas from deep underground using high-pressure liquid, and framed the initiative as a pursuit of “sustainable” extraction, emphasizing that environmental impacts would be minimized. Separately, an explosion at the coker units of the Dos Bocas refinery in Mexico put pressure on the domestic market.
• China has granted additional crude oil import quotas to private refineries to ensure that the domestic product market remains well supplied amid Middle East disruptions that have forced state refineries and some large independent operators to cut production. Several Chinese independent refineries, backed by the new import quotas granted by Beijing, began seeking crude cargoes for immediate delivery following Wednesday’s oil price collapse, according to three trading sources.
PRICE DYNAMICS
Crude oil prices experienced high volatility this week, marked by a peak early in the week, followed by a sharp drop after the Middle East truce announcement, with the week closing in a downward trend but remaining elevated compared to prior years.
However, uncertainty about the agreement's durability kept prices higher than in the pre-crisis period. Despite the weekly decline, crude has shown an upward year-on-year trend, with a cumulative increase of more than 50% compared to the same period of the prior year.
In any case, the issue that concerns the Trump Administration most — domestic U.S. gasoline prices — is projected to take at least two weeks to reflect the decline, due to restocking constraints at gas stations.
If we believe that the interests of both parties point toward a restoration of transit through Hormuz, crude prices will continue to trend toward normalization around $70/BBL, albeit with high volatility. If, on the other hand, transit remains blocked, prices will climb back above $120 per barrel.
As things stand, benchmark crudes Brent and WTI closed on Friday, April 10, 2026, at $95.2/BBL and $95.8/BBL, respectively — a decline of more than 13% from the prior week’s close. On Monday, markets reflected Trump’s threats to blockade the Strait of Hormuz for tankers carrying Iranian crude or those that had paid a toll to Iran, with prices climbing back above $100/BBL.
VENEZUELA
Between Euphoria and Disillusionment
Venezuela is going through a phase — not for the first time in recent years — characterized by hope that the political and economic situation will improve, alongside objective indicators that such hope may be unfounded, though not impossible.
There is considerable uncertainty surrounding the achievements of what has been called the stabilization and recovery phases, under the "guardianship" of the Trump Administration. The doubts likely stem from an economy marked by sharp currency devaluation but featuring sector-level growth projections. The exchange rate market has failed to curb the bolívar's depreciation, despite a substantial increase in foreign-currency availability resulting from a nearly 50% rise in Venezuelan basket prices. The problems appear to be related to the manner in which the Central Bank conducted its auctions and, more recently, to interventions at exchange rates set by the institution. This recently implemented mechanism appears to have narrowed the gap between the official and parallel rates. Behind the scenes, it is mentioned that the Trump Administration is pressing for the replacement of the BCV’s board with a professional directorate. The IMF is conducting a consultation among its members on the recognition of the interim government and the consequent resumption of relations with Venezuela.
Meanwhile, oil production recovery, which showed some signs of momentum in the first quarter, has yet to reflect a change in trend relative to the growth achieved under OFAC licenses in 2023 and 2024.
Regarding the pace of economic recovery, the absence of a political transition process and the final phase of Marco Rubio’s three-stage plan have slowed the conversion of initial interest — following January 3 — into investment and activity. On the subject of hydrocarbon industry recovery, at least two schools of thought exist:
• Those who see Venezuela as a key player in shaping the global oil future. Its vast resources and distance from the geopolitical flashpoint of the Middle East make it a key piece in hemispheric energy security under U.S. tutelage and support. This camp holds that Venezuela is at the beginning of a period of double-digit growth.
• The other camp, without contradicting the long-term oil vision, perceives that many of the ills that caused the collapse of the national oil industry — including discretionary practices, lack of transparency, corruption, absence of separation of powers, and territorial security issues, among others — not only persist, but there appears to be no willingness to eliminate them. This group also contends that part of the current euphoria rests on today’s oil prices, inflated by the supply shock, a phenomenon that may prove cyclical, as has been the case so many times before.
Social Tension and Protests
While analysts, financiers, and investors debate between these two visions, social tensions are rising due to the unresolved wage crisis, leaving the population increasingly unable to meet even its most basic needs. As a result, popular protests have re-emerged.
On Thursday, April 9, large marches were held in several cities, led by unions, pensioners, and students, demanding fair wages amid inflation exceeding 600%. The government resorted to its traditional playbook, repressing the marches — particularly in Caracas — and swelling the ranks of political prisoners. The release of political prisoners and the number of those granted amnesty have slowed, and collateral processes such as the closure of El Helicoide have not been carried out; to the contrary, disturbances and human rights violations are being reported at El Rodeo prison.
The demonstrations were partly a protest against the interim president’s unfulfilled promises of a “responsible increase” in wages for May 1, acknowledging that the current minimum wage is inadequate given that a basic household basket costs $645 and that the bolívar has depreciated 549.7% over the past year.
Investor Interest in Hydrocarbons
Interest in investing in Venezuela’s hydrocarbon sector remains high. A significant number of companies have visited the country and engaged consultants to assess the competitiveness of opportunities. However, as noted above, the conversion of interest into actual investment has been relatively limited. Both ExxonMobil and ConocoPhillips sent technical teams to evaluate opportunities and the state of infrastructure and public services.
In the natural gas sector, there is a comprehensive rethinking of the relationship between Trinidad and Venezuela. Shell and Trinidad’s National Gas Company are accelerating plans to develop the Dragon gas field in Venezuela to supply gas to the liquefaction plant in Trinidad. According to statements made to Reuters by Trinidad’s National Gas Company president Gerald Ramdeen, the company, in partnership with Shell, plans to begin natural gas production in 2027 at the offshore Loran-Manatee field, which straddles the border between the two countries. Loran holds reserves of 7.3 TCF, while Manatee has estimated reserves of 2 TCF. Loran was discovered by PDVSA in 1981, and Chevron is currently PDVSA’s partner in the gas license for the Venezuelan side of the block. Reportedly, Chevron is relinquishing these gas licenses as part of negotiations for the Ayacucho 8 block in the Orinoco Oil Belt.
OIL OPERATIONS
Weekly Production
This week’s production stood at 892 thousand barrels per day (Mbpd) with no adverse effects reported from power outages or blending capacity constraints for Orinoco Belt crude. The geographic breakdown was as follows:
Region | Mbpd |
West | 247 |
East | 110 |
Orinoco Belt | 535 |
TOTAL | 892 |
Mixed Companies Under OFAC Licenses and LOH Contracts
Mixed companies operating under OFAC licenses and new contracts established under the recently amended Hydrocarbons Organic Law (LOH) — under the modality of contracting the private minority partner as “Operator” — are producing the following volumes:
Company | Mbpd |
Chevron | 243 |
Repsol | 47 |
M & P | 27 |
Orinoco Belt Mixed Companies with Chinese and Russian Partners
Company | Mbpd |
PetroSinovensa | 94 |
PetroMonagas | 87 |
Refining
Venezuela’s domestic refineries processed 236 Mbpd of crude and intermediate products, yielding 73 Mbpd in gasoline and 76 Mbpd in diesel.
We estimate that the Venezuelan basket price reached $86.2/BBL.
[1] International Analyst
[2] Nonresident Fellow, Baker Institute
