For 21 hours, American and Iranian diplomats sat across from each other at the Sirena Hotel in Islamabad. It was the highest level meeting between Washington and Tehran since 1979. The talks were described as calm, although they walked away without a deal on Sunday. Vice President JD Vance flew back to the United States, while Iran's delegation stayed behind to discuss with Pakistani mediators. No agreement was signed.

What broke down

Three issues blocked progress, according to Iranian officials familiar with the talks.

The first was the Strait of Hormuz. The US demanded that Iran reopen the waterway immediately to all shipping. Iran refused, saying it would do so only after a final peace deal. Iran currentlty controls the strait, through whicch about 20 percent of the world's oil and gas supplies pass. Tehran sees that control as leverage, and it was not ready to give it up.

The second issue was Iran's stockpile of highly enriched urnanium. The US wanted Iran to hand over or remove nearly 900 pounds of near-bomb-grade uranium. Iran made a counterproposal, but the two sides could not find a compromise.

The third issue was money. Iran asked for roughly $27 billion in frozen oil revenues held in Iraq, Luxembourg, Bahrain, Japan, Qatar, Turkey, and Germany to be released for reconstruction, to which the Americans said no.

The US also demanded that Iran stop funding armed groups across the region and commit to never developing nuclear weapons. Iran's parliament speaker, Mohammad Bagher Ghalibaf, said the American side "failed to gain the trust of the Iranian delegation." Iran had been bombed twice during previous negotiations over the past year, which only worsened the trust.

What each side said

Vance was direct at his press conference. "The bad news is that we have not reached an agreement, and I think that's bad news for Iran much more than it's bad news for the United States," he said. He called the US offer the "best, final offer" and said Iran had "chosen not to accept our terms."

Iran's Foreign Minister Abbas Araghchi said the two sides came close to an understanding but "encountered maximalism, shifting goalposts, and blockade." Iran's foreign ministry spokesman added that no one had expected a deal in a single session.

President Trump told Fox News on Sunday it was a "really good meeting," except for one thing: "They want to have nuclear weapons. It's not going to happen."

Why Islamabad, and why now

Pakistan brokered the meeting by walking a careful line. It has good ties with both Tehran and Washington and played no part in the war. Pakistan's army chief, General Asim Munir, knows the leadership of Iran's Revolutionary Guards from his time as head of military intelligence a decade ago. He also has a rapport with Trump, who has called him his "favorite field marshal."

The setting itself was unusual. Islamabad is a quiet, leafy capital that feels detached from Pakistan's broader chaos. The Serena Hotel, where talks were held, is a favourite of the expatriate community, with a sushi restaurant, banquet halls, and a rooftop pool. The city was locked down during the talks, with thousands of troops on the streets.

Even many Pakistanis said it felt surreal that negotiations of this scale were happening there.

A ceasefire, but a fragile one

The talks took place inside a two-week ceasefire that both sides announced on April 7. But that ceasefire was already under pressure.

Two US Navy destroyers transited the Strait of Hormuz during the talks, as part of a mine-clearing mission. Iran's Revolutionary Guards warned that any military vessels attempting to cross the strait would face "a strong response." Iran's state media claimed it forced one US ship to turn back. The US military disputed that account.

Trump announced a naval blockade of the strait on Sunday to stop Iran from using the waterway. Iranian officials warned that "any miscalculated move will trap the enemy in the deadly whirlpools in the Strait." The ceasefire remains officially in place, but it is holding on thin ground.

Israel added to the pressure. Prime Minister Benjamin Netanyahu said during the talks that "Israel will continue to fight Iran's terror regime and its proxies." Israeli strikes continued in southern Lebanon, where at least six people were killed in the Tyre district. Iran had insisted the ceasefire covered Lebanon. The US and Israel both rejected that.

What comes next

Pakistani Foreign Minister Ishaq Dar said his country will work to set up a new round of dialogue. A retired three-star Pakistani general, Muhammad Saeed, said Pakistan would continue to pass messages between the two sides and that Iran might return with a counter-offer after consulting its leadership at home.

"Nobody from the two sides has said that they are done with this process and that it is dead," Saeed said.

Vali Nasr, an Iran expert at Johns Hopkins University, called these "the most serious and sustained direct talks between the US and Iran," saying they showed that both sides want to end the war.

The costs of going back to war are high for both countries. Iran's economy has been hit hard by sanctions and six weeks of airstrikes. The US is dealing with a global energy crisis tied to the Hormuz blockade. Oil prices have soared. Neither side has an obvious interest in letting this collapse completely.

But the gap between them remains wide. Iran is not ready to give up its nuclear programme or its grip on the strait without firm guarantees. The US, and Israel, are not ready to give those guarantees. For now, the diplomats have gone home, the ceasefire is fraying, and the next move belongs to both sides.