As negotiations between the United States and Iran appear to move towards a possible breakthrough, the stakes extend far beyond diplomacy between two longstanding adversaries. At issue is not simply a ceasefire or a nuclear agreement. It is whether the world economy can avoid sliding deeper into widening energy, food and cost-of-living crises centred on the Strait of Hormuz.

Recent reports suggest Washington and Tehran are discussing a deal that would reopen the strait as part of a broader arrangement. The proposal reportedly includes a 60-day truce, the reopening of shipping lanes, some sanctions relief and renewed talks on Iran’s nuclear programme.

The urgency is obvious. Roughly a fifth of the world’s oil and a substantial share of liquefied natural gas supplies normally pass through the Strait of Hormuz. Over recent weeks, disruptions to shipping, military tensions and competing naval controls have driven up freight costs, energy prices and insurance premiums.

If a durable agreement is not reached soon, the consequences are likely to spread rapidly across the global economy.

To be sure, wealthier economies will feel the effects. Higher fuel prices will intensify inflationary pressures already weighing on households in Europe and North America. Governments confronting slowing growth and persistent cost-of-living concerns will face renewed political pressure as transportation, electricity and food........

© Al Jazeera