US intelligence indicates China is  preparing to deliver new air defense systems to Iran within the next few weeks, CNN reported late on Friday, citing three people familiar with recent intelligence assessments.

The network said there are indications that Beijing is working to route the shipments  through third countries to mask their origin.

The US State Department, the White House, the Chinese embassy in Washington and China’s foreign ministry did not immediately respond to Reuters requests for comment.

Beijing is preparing to transfer shoulder-fired anti-air missile systems known as MANPADs, CNN said, citing sources it did not name.

The US and Iran are set to hold high-level negotiations on Saturday in Pakistan’s capital Islamabad, seeking ways to end their six-week-old war.

US and Iranian negotiators held their highest-level talks in half a century on Saturday in Pakistan to try to end their war even as President Donald Trump said his military had sunk Tehran’s mine-layers and was clearing the Strait of Hormuz.

“We’re now starting the process of clearing out the Strait of Hormuz as a favor to Countries all over the World,” Trump posted, saying 28 Iranian mine-dropping vessels had been destroyed.

Iran’s state-affiliated Nournews called that “false news.”

Amid conflicting reports, Iranian state TV added that no US ships had crossed the strait, a crucial transit point for global energy supplies that Tehran has effectively blocked but Trump has vowed to reopen.

The waterway, which lies on Iran’s southern coast, was one of the main points on the agenda in Islamabad for the first direct US-Iranian talks in more than a decade and the highest-level discussions since the 1979 Islamic Revolution.

Trump’s Vice President JD Vance, special envoy Steve Witkoff and son-in-law Jared Kushner flew in on Saturday and met Iranian Parliamentary Speaker Mohammad Baqer Qalibaf and Foreign Minister Abbas Araqchi for two hours before a rest, according to a source from mediator Pakistan.

The Iranian delegation had arrived on Friday dressed in black in mourning for Supreme Leader Ayatollah Ali Khamenei and others killed in the six-week war. They carried shoes and bags of some students killed during the US bombing of a school next to a military compound, the Iranian government said.

“There were mood swings from the two sides and the temperature went up and down during the meeting,” said another Pakistani source of the first round of talks.

PROGRESS OF NEGOTIATIONS UNCLEAR

The war has sent global oil prices soaring, killed thousands of people and seen unprecedented hits on Gulf Arab states.

Amid conflicting versions from officials and media in both nations, the US and Iranian sides appeared to remain far apart.

Before the talks began, a senior Iranian source told Reuters the US had agreed to release frozen assets in Qatar and other foreign banks. But a US official swiftly denied that.

As well as release of assets abroad, Tehran is demanding control of the Strait of Hormuz, payment of war reparations and a ceasefire across the region including in Lebanon, according to Iranian state TV and officials.

Trump’s stated goals have varied during the campaign, but as a minimum he wants free passage for global shipping through the strait and the crippling of Iran’s nuclear enrichment program to ensure it cannot produce an atomic bomb.

US ally Israel, which joined the February 28 attacks on Iran that launched the war, has also been bombing Tehran-backed Hezbollah terrorists in Lebanon, killing nearly 2,000 people.

Israel and the US have said Lebanon is not part of the Iran-US ceasefire.

Mutual distrust is high.

“We will negotiate with our finger on the trigger,” Iranian government spokesperson Fatemeh Mohajerani said on state TV.

“While we are open to talks, we are also fully aware of the lack of trust; therefore, Iran’s diplomatic team is entering this process with maximum caution.”

Tehran’s agenda includes aiming to collect transit fees in the Strait of Hormuz, a chokepoint for about 20 percent of global oil and liquefied natural gas shipments.

The biggest ever disruption there has fed inflation and slowed the global economy, with an impact expected to last for months even if negotiators succeed in reopening the strait.

Nevertheless, three Liberian- and Chinese-flagged supertankers did pass through the strait on Saturday, shipping data showed, marking what appeared to be the first vessels to exit the Gulf since last week’s US-Iran ceasefire.

STRIKES ON LEBANON

Strikes on southern Lebanon continued on Saturday morning, Lebanese state media said. Reuters reporters heard an Israeli surveillance drone flying over the capital Beirut from Friday night into the next morning and warplanes broke the sound barrier twice over the city.

Hezbollah announced it had conducted several military operations against Israeli positions on Saturday, both within Lebanese territory and in northern Israel.

Israeli and Lebanese officials plan talks in the US on Tuesday.

For the US-Iran talks, Islamabad, a city of just over 2 million people, was under unprecedented lockdown with thousands of paramilitary personnel and army troops on the streets.

Pakistan’s mediating role is a remarkable transformation for a nation that was a diplomatic outcast a year ago.

“This was a world war that Pakistan stopped. It played a big role and we should appreciate it,” said dry cleaner Nasir Khan Abbasi at a market in Islamabad. “I really like this and I feel great that Pakistan’s name is shining in the world.”

The war in the Middle East will have a cascading impact on the global economy, even if a ceasefire announced by US President Donald Trump takes hold, World Bank President Ajay Banga told Reuters in an interview on Friday.

And the damage will be far deeper if the ceasefire fails and the conflict escalates, he said.

Banga on Tuesday said global growth could be lowered by 0.3 to 0.4 percentage point in a baseline scenario, with an early end to the war, and by as much as 1 percentage point if it endures. Inflation could increase by 200 to 300 basis points, with a much higher impact – of up to 0.9 percentage point – if the war continues, he said.

The World Bank’s baseline estimate now projects growth in emerging markets and developing economies of 3.65% in 2026, compared to 4% in October, dropping as low as 2.6% in an adverse scenario with a longer-lasting war. Inflation in those countries was now forecast to hit 4.9% in 2026, up from the previous estimate of 3%. The extreme scenario could see inflation rising as high as 6.7%, according to estimates viewed by Reuters.

The war, which has killed thousands of people across the Middle East, has sent the price of oil up by 50% while disrupting supplies of oil, gas, fertilizer, helium and other goods, as well as tourism and air travel.

The two-week ceasefire announced by Trump appears tenuous, with Israel and Iran continuing strikes. Iran said on Friday that blocked Iranian assets must be released and a ceasefire must take hold in Lebanon before US-Iran talks, scheduled for Saturday in Pakistan, can proceed. Trump said that US warships were being reloaded with ammunition in case the talks failed.

“The question really is, does this current peace and the negotiations that are going to be happening this weekend – will this lead to a lasting peace and then a reopening of the Strait (of Hormuz)?” said Banga. “If it doesn’t lead to that, and if conflict were to break out again, would that have an even larger impact, or longer-term impact on energy infrastructure?”

Banga said the world’s largest development bank was already in discussions with some developing countries, including small island states with no natural energy resources, about tapping funds from existing programs under “crisis response windows.”

The World Bank’s crisis toolkit allows countries to tap previously approved but not yet disbursed funds without additional board approvals, increasing flexibility.

But Banga said the bank was cautioning countries to avoid setting up energy subsidies that they could not afford, which would trigger even bigger problems in the future.

“I worry about making sure that they can come through this crisis, targeting what they need to do, but not doing anything that further deteriorates that fiscal space,” he said.

Many developing countries also have high debt levels and interest rates remain high, which constrains their ability to borrow money to fund measures to respond to the jump in energy costs and other goods caused by the war.

The crisis has put a fresh spotlight on the need for countries to diversify energy supplies and boost self-sufficiency, Banga said. The World Bank last June ended a longstanding ban on funding nuclear energy projects as part of a push to meet rising electricity needs.

Nigeria, which had long faced problems, stood to benefit from a $20 billion investment made by the Dangote Group in refineries, which had actually increased output during the war, and was now supplying aviation fuel to neighboring countries.

“Nigeria should be breathing a sigh of relief. They’ve built up the ability to have energy security for themselves through that huge investment,” he said. “It’s actually a really good example of the right thing being done in terms of energy self-sufficiency for them, but also for their neighbors.”

The World Bank is also working closely with Mozambique, another African country, to expand its energy production capabilities in both natural gas and hydropower.

The World Bank had many energy products in the pipeline, Banga said, noting that talks were under way with some countries looking to extend the life of their fleets of nuclear reactors, and others keen to move into nuclear power.

“If you don’t get nuclear and hydro and geothermal going at scale, along with wind and solar, they will end up doing more with traditional fuels, and nobody really wants that,” he said.