The US and Iran are back at war.
On Monday, President Donald Trump announced the United States would reimpose its naval blockade of Iran, effective Tuesday afternoon. Iran responded by declaring the Strait of Hormuz closed to all traffic that does not route through its preferred corridor and coordinate with Iranian authorities. Brent crude, which had settled into the low $70s a barrel during the brief period of relative calm, is back above $80 and rising, as traffic through the Strait collapses toward where it was in the depths of the war.
As I said at the time it was signed, the memorandum of understanding reached by the US and Iran in late June didn’t actually resolve the issue at the center of this conflict: how much authority Iran would have over the Strait of Hormuz. The two sides agreed to end their dual blockades and stop shooting, but their positions hadn’t changed. By leaving control of the Strait deliberately vague, the MOU papered over a disagreement that was always going to resurface. Now it has.
Tehran read the vagueness as implicit recognition of its authority over the waterway. Washington and the Gulf states did not. In the weeks that followed, ships continued to use the US-sponsored southern Omani route, bypassing the Iranian-controlled northern corridor. Frozen Iranian assets, which the Islamic Republic understood to be part of the deal, were never released. From Iran’s perspective, it honored the agreement and received nothing in return. So last week it started attacking ships transiting the Omani route again. The US responded first by pulling Iran’s oil sanctions waiver, then with air strikes that grew in intensity and scope over the weekend, hitting hundreds of targets along Iran’s coastline and military positions. When Trump ordered the blockade back into effect, the ceasefire, already fraying, collapsed.
The Strait is now effectively closed again. A week ago tanker traffic was around 25% of pre-war levels. In the last 48 hours, that’s dropped below 15%. Just ten ships transited on Monday, the lowest daily count in over a month. Never mind that Iran doesn’t have the naval capacity to blockade the strait: it never did, and it doesn’t need to. Tehran just needs to make transit dangerous enough that crews won’t sail and insurers won’t cover the voyage, and it has anti-ship missiles and drones to do that indefinitely despite ongoing US strikes. It doesn’t much matter whether the US Navy is willing to escort tankers through; most shippers won’t transit without Iranian acquiescence.
Things are likely to get worse before they get better. Talks between Iran and Oman over the weekend produced no meaningful progress. Diplomatic channels have gone quiet, and both sides are digging in. For now, the confrontation looks much as it did before the MOU: US airstrikes on military and radar targets along the Iranian coast, Iran targeting Strait traffic and US assets in the region, and both sides blockading the other. Whether this hardens into a prolonged standoff or escalates further is an open question, but both sides’ incentives push away from near-term de-escalation and toward a longer – and potentially hotter – conflict.
The calculus on the Iranian side hasn’t changed. What Tehran is after isn’t the frozen assets or sanctions relief the MOU promised (and largely failed to deliver) but permanent, institutionalized control and monetization of Hormuz. This isn’t a bargaining chip Iran is willing to relinquish or trade away. The Strait is the cornerstone of the Islamic Republic’s strategic posture, offering greater leverage and deterrence than either its nuclear program or its proxy network right now. The regime is emboldened to defend it at all costs, and its hardline base – the one that turned out in droves for Ali Khamenei’s funeral last week – backs an aggressive posture to force the US to back down on the battlefield over a negotiated retreat.
For his part, Trump doesn’t want to own a “forever war,” but after June’s MOU bought him little more than a few weeks of quiet, he has decided he doesn't have much appetite for another bum deal either. He knows that doing the same thing that led to a failed ceasefire is unlikely to produce a better result tomorrow. He needs to try something different, something more likely to extract an Iranian concession or yield a durable win. His constraints are weaker than many assume: he’s already accepted that midterms will go badly for Republicans, cares more about his legacy than the House majority, and he is not meaningfully restrained by his advisors. The United States, which has weathered the economic costs of this conflict better than most countries, also has enough refined product (diesel and gasoline) stockpiled to get through the summer before supply constraints start biting. This gives Trump leeway to keep up the current strike campaign for a while (albeit not indefinitely, given the drawdown of Tomahawks and air-defense interceptors) … or to step it up.
Trump has recently floated hitting Pickaxe Mountain and “taking the oil” at Kharg Island as escalation options. But actually finishing off what’s left of Iran’s nuclear program (including retrieving the nuclear “dust”), seizing (rather than destroying) Iranian oil infrastructure, or – most importantly – meaningfully degrading Iran’s ability to threaten the waterway would all require a ground component, and President Trump has not been prepared to absorb the costs of that. Yesterday he warned he’d hit Iran’s power plants and bridges next week if they don’t come to terms – a more credible threat despite being the ninth time he’s made some version of it (!).
If he follows through with strikes on Iranian civilian and energy infrastructure, Tehran's response won’t stop at tankers and US bases in the region. It will likely extend to Gulf state energy infrastructure directly, and this time regional countries are more likely to strike back. Tehran could also get the Houthis to open a second front the way Hezbollah did in the past (though for financial, not ideological, reasons) – hitting Saudi energy infrastructure at Yanbu or the East-West pipeline, or moving to close Bab al-Mandab and adding 4-5 million barrels a day of disruption on top of the Hormuz closure. I don’t think it will happen, but it’s more likely than it was 48 hours ago (the Houthis did exchange fire with the Saudis on Monday). It would make an already-widening conflict broader, costlier, and harder to contain.
The off-ramp, when it eventually comes, is likely to involve some form of institutionalized (if divided) Iranian control over the Strait, modeled on Turkey’s role in the Dardanelles or Malaysia’s and Singapore’s role in Malacca. Under this architecture, a collective fund paid into by Gulf states would formalize Iran’s management role in the waterway. This is the track Oman has been working on for months. The framework is understood by all parties. The only problem is that neither Washington nor Tehran is ready to accept it just yet: Iran still wants more than a nominal management fee and a seat in a collective fund (per-ship tolls and recognized permanent authority), and Trump won’t sign on to anything that looks like rewarding Iranian aggression (again). It will likely take a much longer and more painful dual blockade, or a destructive round of escalation, before they are willing to reach that compromise.
Either way, the pre-war Strait of Hormuz, with its relatively open transit regime, is probably gone for good. Whatever emerges to replace it will reflect the new and contested balance of power in the waterway. The US won’t like it, but it won’t have much choice but to accept it. Sooner or later, the G-Zero comes for the strong, too.
