Morgan Stanley said negotiations between the United States and Iran over the Strait of Hormuz are likely to become a lengthy and uneven process, keeping uncertainty around crude supply elevated and leaving global oil markets relatively tight. In an Aug. 13 report, the bank said the mid-June memorandum of understanding on commercial shipping, a rollback of U.S. maritime blockade sanctions and Iran's nuclear program has not settled the core disputes. Iran is linking a full reopening of the strait to a broader agreement that includes lifting the blockade, easing sanctions and compensation, while the United States opposes making concessions in advance. Morgan Stanley said the main issue is less whether talks fail outright and more whether shipping returns to normal, IAEA (UN nuclear watchdog) inspectors regain access, sanctions are eased and both sides avoid military escalation. The bank kept a bullish view on oil and said another sharp rebound in oil prices is the main short-term risk for U.S. equities. Even so, it said the Federal Reserve would need a much larger inflation shock than markets currently expect before raising rates again, and it still expects the Fed to keep rates on hold this year.