Iran is losing in the air, forfeiting its infrastructure, and suffocating its own economy, yet it retains its principal asset: the ability to set the price of instability. That is precisely why a fragile ceasefire may be less advantageous for the Iranian leadership than a conflict it still considers manageable.
On July 31, Iranian forces, according to their own statement, stopped two vessels attempting to exit the Strait of Hormuz and turned back four others. For the market, this was enough: crude oil rose again, insurance estimates worsened, and importing governments received yet another reminder that the fate of a significant portion of global energy depends not only on the fleets of the US and the Arab monarchies, but also on decisions made in Tehran. Over the course of July, Brent rose by approximately 23 percent, even though just days earlier hopes for a pause in strikes had sent quotes tumbling by nearly 9 percent.
At first glance, Iran's actions appear contradictory. A state that has endured five months of strikes, lost part of its military infrastructure, and faced a port blockade, industrial destruction, and an inflationary shock ought to be seeking any path toward a durable peace.
Yet that conclusion holds true only if one assumes a ceasefire is Tehran's ultimate objective. Judging by the dynamics of recent weeks, the Iranian leadership views peace not as an absolute good, but as a transaction whose price must include lifting the blockade, easing sanctions, recognizing Iran's special status in the Strait of Hormuz, and guaranteeing regime survival.
This is precisely where the main fault line of the current war lies. The US and its allies are attempting to strip Iran of its ability to coerce the region into concessions. Tehran, conversely, aims to prove that even a weakened Iran is capable of making normal life around it excessively costly.
This is no longer a debate over who controls the skies above Iran. It is a struggle for the right to dictate the cost of peace.
The War Began During Negotiations - and Destroyed the Logic of Compromise
The present conflict erupted on February 28, 2026, when the US and Israel launched strikes against Iran following the collapse of negotiations over its nuclear program, missile arsenal, and sanctions. As late as February 26, Washington had anticipated reaching an agreement that would preclude the creation of an Iranian nuclear weapon. Tehran insisted on the recognition of its right to enrich uranium and refused to discuss ballistic missiles in the format proposed by the American side. Two days later, diplomacy gave way to war.
In the first 24 hours of the operation, designated by the Pentagon as Epic Fury, American forces attacked over a thousand targets: command centers, air defense facilities, naval forces, missile sites, and intelligence infrastructure. The Trump administration formulated several objectives: destroy Iran's capacity to deploy ballistic missiles and drones, render its fleet operational, prevent the acquisition of nuclear weapons, and weaken Tehran's network of regional allies.
The strikes eliminated the former Supreme Leader Ali Khamenei along with a number of senior security officials. On March 8, the Assembly of Experts appointed his son, Mojtaba Khamenei, as the new Supreme Leader. According to Reuters, the Islamic Revolutionary Guard Corps pushed through his candidacy, calculating it would secure a leader dependent on the regime's security core. Mojtaba himself has not appeared in public since his appointment; agency sources reported he suffered severe face and leg injuries on February 28.
This succession of power had a strategic consequence that Washington likely underestimated. By eliminating a portion of the political leadership and launching a war mid-negotiations, the US drastically narrowed the space for compromise.
Any concession by the new Supreme Leader could now be framed internally not as pragmatism, but as capitulation to his father's killers. For a regime whose legitimacy had already been eroded by the January protests, such a symbolic defeat is far more perilous than another military setback.
Furthermore, the physical elimination of the former elite failed to yield a more moderate authority. On the contrary, it accelerated the transfer of real power to the IRGC - an entity whose very existence is built upon confrontation with the US, Israel, and the Arab monarchies.
Washington decapitated a segment of the Iranian system, but simultaneously destroyed many of those who theoretically could have signed a compromise and presented it to society as a state decision rather than a personal defeat for the Khamenei family.
Tehran Is Losing the War in the Air, but Winning the Right to Disrupt Calculations
From a military standpoint, Iran's position remains dire. American strikes have battered IRGC command posts, coastal surveillance assets, missile and drone complexes, aircraft hangars, warehouses, and logistical infrastructure. On July 30, US Central Command reported another two-hour wave of attacks against dozens of IRGC facilities. Earlier, on July 21, targets included military operations centers, naval capabilities, and supply systems linked to threats against commercial shipping.
Iranian air defense has suffered severe damage, and restoring complex systems is hampered by sanctions, component shortages, and the destruction of the industrial base. However, eliminating the entire missile arsenal has proved far more difficult than Washington's political rhetoric suggested.
As early as late March, American sources acknowledged that only roughly one-third of Iran's missile capacity could be reliably confirmed as destroyed. This does not mean Iran retains its former strike power. It means that even a severely diminished arsenal is sufficient for periodic attacks on bases, ports, oil facilities, and sea lines of communication.
Thus arises the asymmetry upon which Tehran's strategy is built. The US can destroy dozens of targets in Iran daily, but cannot guarantee that a single Iranian missile or drone will not penetrate to an oil storage facility, base, or tanker.
Iran is incapable of defeating the US in a direct war, but it is capable of rendering a US victory politically uncertain, economically exorbitant, and strategically incomplete.
This is the classic logic of a lesser power possessing instruments of disproportionate damage. It does not need to control the sea continuously. It is enough to periodically demonstrate that the opponent cannot guarantee total control either.
It does not need to destroy the export framework of the Persian Gulf. It is enough to compel insurers, captains, traders, and banks to treat it as potentially unreliable.
Tehran is not fighting for military superiority. It is fighting to retain the right to create exceptions to the rules. If Washington asserts that Hormuz is open, Iran needs only to halt a few vessels to refute that claim in practice.
Peace Without Concessions Turns Iran's Defeat Into a Permanent Status
On June 15, the US and Iran signed a preliminary ceasefire agreement. It envisioned a 60-day pause, the restoration of navigation through the Strait of Hormuz, and discussions on sanctions relief. Iranian state media later reported that the memorandum anticipated a cessation of mutual hostilites and maritime blockades, Tehran's access to a portion of its frozen assets, and a commitment to assist in returning maritime traffic to pre-war levels.
Yet the agreement was too general to survive the collision of incompatible interpretations. The US demanded a public pledge to halt attacks on shipping, open all transit lanes, and forgo any fees. Iran insisted that strait security must be managed with due regard for its sovereign rights and operational control over a substantial portion of the routes.
Following renewed attacks on tankers, Washington revoked the license permitting Iran to market oil on July 7 and resumed strikes. By mid-July, the truce had effectively collapsed.
For Tehran, the issue with a durable ceasefire is that it threatens to freeze the worst outcomes of the war.
The American naval blockade of Iranian export flows remains in effect. Sanctions do not automatically vanish. Destroyed facilities require billions of dollars and access to technology. Saudi Arabia, the UAE, and Qatar are gradually restoring exports using bypass routes, reserves, and support from Western partners.
Iran, meanwhile, risks remaining a state that lost part of its military infrastructure, was stripped of its former leadership, and received in return neither recognition of its demands nor sustainable market access.
This is why controlled confrontation may strike Tehran as more rational than a bad peace. As long as the crisis persists, Iran remains an indispensable participant in any transaction. Once a final ceasefire takes effect, it risks transitioning from a party to the conflict into an object of long-term containment.
This explains why fresh strikes and vessel seizures can occur simultaneously with talk of a truce. For Tehran, military pressure does not contradict diplomacy. It is the mechanism used to prevent diplomacy on the enemy's terms.
Hormuz Is Not a Strait, but a Global Kill Switch
Prior to the war, roughly 20 million barrels of crude oil and petroleum products passed through the Strait of Hormuz daily - approximately one-quarter of global seaborne oil trade. Around 80 percent of these flows were destined for Asia.
Through that same corridor passed nearly a fifth of the world's liquefied natural gas trade, with Qatar and UAE export chains particularly dependent on it.
After the onset of hostilities, oil flows through the strait plunged from roughly 20 million barrels per day to an average of about 2.7 million barrels in March, April, and May. The International Energy Agency estimated aggregate supply losses from Middle Eastern producers through June at over 1.3 billion barrels.
In March, global oil supply contracted by 10.1 million barrels per day - the largest monthly disruption in the history of the global oil market.
Bypass options are limited. Saudi Arabia and the UAE possess pipelines extending to the Red Sea and the port of Fujairah, but available spare capacity does not compare to standard flows through Hormuz.
According to US Energy Information Administration estimates, in 2025 roughly 2.6 million barrels per day of spare bypass capacity could be mobilized in the event of a severe disruption. The UAE operates a 1.8 million barrel per day pipeline to Fujairah, while a second line of 1.5 million barrels is not expected until 2027.
Consequently, Iran does not need to seal the strait hermetically. A complete blockade would construct a pretext for the harshest possible international response and deprive Tehran of plausible deniability.
Far more effective is a calibrated access regime: some vessels are permitted through, others are detained, specific routes are declared safe only after clearance, and responsibility for incidents remains contested.
Recent data illustrates the sensitivity of the network. According to Lloyd's List Intelligence estimates, between July 20 and July 26, 39 vessels traversed the strait, compared to 82 the preceding week. Non-Iran-affiliated traffic dropped by an additional 27 percent.
By July 27, the International Maritime Organization had confirmed 62 regional incidents and the deaths of 17 mariners.
Iran does not need to prove it exercises total control over Hormuz. It needs only to prove that no one else can guarantee its unhindered operation.
Millions for a Single Voyage: How Tehran Taxes the World on Fear
In early March, war risk insurance premiums for tanker hulls rose from approximately 0.25 percent to 3 percent of vessel value. For a vessel valued at $250 million, that represents a jump in a single insurance payment from roughly $625,000 to $7.5 million.
Compounding this are crew hazard pay, delays, security expenses, rerouting costs, demurrage fees, and contract cancellation risks.
This represents the hidden financial mechanism of the Iranian strategy. A missile may miss a tanker and a drone may be intercepted, but the mere act of launching alters the price of the cargo.
The military effect is measured not solely by destruction. It materializes the moment an underwriter raises a rate, a bank demands additional collateral, a shipowner turns a vessel around, and an importer begins purchasing feedstock at a premium.
Iran converts uncertainty into an export commodity. It does not sell oil in its former volumes, but it shapes the price of oil sold by others. It does not control global shipping, but it retains the power to disrupt its pricing model.
This is a form of geoeconomic coercion: damage is inflicted less by physical destruction of infrastructure than by raising transaction costs across the entire framework.
The repercussions reach far beyond the region. The International Monetary Fund in July projected global economic growth in 2026 at just 3 percent, with global inflation rising to 4.7 percent against 4.1 percent in 2025.
Nearly 500 economists surveyed by Reuters raised inflation forecasts for 39 out of 50 major economies and lowered growth projections for 32. The war emerged as a primary driver of revisions, as oil has appreciated by over 20 percent since February.
Even if physical deficits are partially offset by stockpiles, non-regional production, and demand destruction, the risk premium remains. And that premium is Iran's principal weapon.
The Second Trap: Why the Houthis Struck the Red Sea
Hormuz grants Iran leverage over the Persian Gulf. The Bab-el-Mandeb Strait allows it to extend that leverage to the Red Sea, the Suez Canal, and the western coast of Saudi Arabia.
In July, the Houthis announced a naval blockade of Saudi Arabia, attacked ships and oil facilities in the Yanbu and Jizan areas, and threatened to close the southern entrance to the Red Sea.
The choice of targets is deliberate. Yanbu is the terminus of the Saudi East-West Pipeline, the primary route enabling Riyadh to bypass Hormuz.
If Iran generates a threat in the Persian Gulf while the Houthis simultaneously escalate risk in the Red Sea, the Saudi diversification framework transforms into a two-front vulnerability. In July, tankers carrying Saudi oil reversed course, and Saudi Aramco halted operations at the Jizan refinery following attacks.
This is no longer a collection of isolated episodes, but an effort to link two strategic chokepoints into a unified pressure apparatus.
For the global economy, the combined risk of Hormuz and Bab-el-Mandeb is more dangerous than the simple sum of two crises. The former constrains energy outflows from the Persian Gulf; the latter hampers delivery through the Red Sea and Suez.
The alternative route around the Cape of Good Hope extends voyages, ties up additional tanker capacity, and increases fuel, crew, and insurance expenditures.
Yet it is precisely here that the Iranian strategy has begun to yield diminishing returns. Saudi Arabia, which initially sought to avoid direct involvement, carried out strikes against the Houthis and, in coordination with the US, attacked Iran-linked groups in Iraq.
Strikes on July 28-29 resulted in the deaths of at least 20 members of the Popular Mobilization Forces, according to Reuters. Riyadh has likewise proposed a multilateral maritime defense coalition.
Iran sought to demonstrate to the Arab monarchies that their security hinges on an accommodation with Tehran. Instead, it risks convincing them that neutrality no longer offers protection from Iranian proxies.
Tehran Demands Jurisdictional Recognition, Not Freedom of Navigation
Oman, traditionally acting as an intermediary between Iran and the US, proposed a compromise framework for managing the Strait of Hormuz.
The concept envisioned voluntary vessel payments toward navigation, security, and environmental programs, alongside coastal state participation in traffic management. The idea was intended to afford Iran a face-saving benefit without formally converting the strait into a toll corridor.
Tehran rejected the 50-50 joint management model, asserting its intent to control the entirety of the inbound transit lane and part of the outbound lane passing through Iranian waters.
Deputy Foreign Minister Kazem Gharibabadi proposed a temporary arrangement under which both directions would remain heavily dependent on Iranian authorization.
This is a fundamental point. Iran is no longer arguing merely over sanctions or the cessation of strikes. It is attempting to convert a military reality - the capacity to impede vessel movement - into a new diplomatic and legal status.
Washington demands a return to the pre-war norm: free transit without fees or political filtering. Tehran demands that the new norm account for its right to decide which vessels are secure, neutral, or hostile.
International maritime law is grounded in the right of transit passage through international straits and does not grant a coastal state the authority to arbitrarily block commercial shipping.
Law alone, however, does not guide tankers through minefields or missile engagement zones. It is precisely upon the gap between the legal norm and the physical capacity to enforce it that Iran builds its position.
Tehran's objective is not to close Hormuz permanently. Such a decision would harm Iran itself, alienating regional partners and driving major importers to accelerate alternative arrangements.
The objective is different: to compel the world to recognize that normal operation of the strait requires the ongoing political consent of Iran.
External War Has Become the Regime's Internal Security Architecture
The economic foundation of the Islamic Republic is rapidly deteriorating. The International Monetary Fund forecasts a 5.4 percent contraction in Iran's real GDP for 2026, accompanied by a consumer price increase of 68.9 percent.
The World Bank points to severe disruptions in economic activity, rising war costs, threats to oil exports, shortages of vital imported goods, and food security risks.
Reuters has reported damaged factories, power plants, railways, airports, and bridges, alongside widespread job losses and severed trade ties with Persian Gulf nations.
In July, internal Iranian contacts informed the agency that prices for basic commodities had nearly doubled, employment opportunities had dried up, and internet restrictions had severely impacted individuals relying on digital platforms.
These vulnerabilities predated the war. Protests erupted on December 28, 2025, driven by the collapse of the rial, rising prices, and official inflation reaching 42.5 percent by December.
In January, unrest escalated into the most severe internal crisis since the 1979 revolution. Human rights organizations reported thousands killed during the crackdown, while authorities deployed internet blackouts, mass detentions, and the threat of capital punishment.
For a leadership that survived such an internal explosion, war serves as a political scaffold. It permits the regime to attribute economic failures to foreign aggression, expand security force powers, restrict information flow, and designate dissent as a threat to national defense.
Judging by the circumstances of his appointment, the new Supreme Leader is more dependent on the IRGC than his father was. The absence of a public profile for Mojtaba Khamenei makes the coercion apparatus an even more vital instrument of control.
Yet war does not eliminate social discontent. It merely alters its expression. National mobilization can temporarily blunt protest, but inflation near 70 percent, job losses, and commodity shortages gradually convert patriotic consolidation into exhaustion.
Tehran is buying time, but paying for it with its own economic fabric.
Washington Finds Itself in a War Whose Objectives Americans Themselves Do Not Understand
The Iranian strategy is tailored not only to military geography, but also to the US political calendar. The midterm elections are scheduled for November 3, 2026.
US President Trump came to power promising to avoid endless wars, yet the conflict with Iran has already persisted for five months, claimed the lives of 18 American service members, and cost an estimated tens of billions of dollars.
A late-July Reuters/Ipsos poll indicated that only about a third of Americans support the war. Meanwhile, 69 percent of respondents, including 40 percent of Republicans, believe the president has not explained the objectives of the operation clearly enough.
An AP-NORC poll presented an even starker picture: roughly two-thirds of American adults believe the war has not been worth the costs, and approval of Trump's handling of Iran has dropped to 28 percent.
The military toll is also mounting. According to an assessment by the Center for Strategic and International Studies, by July 27, US stockpiles of Patriot interceptors had declined to fewer than one thousand units, while THAAD stockpiles dropped to approximately 250.
This does not deprive the US of the capacity to defend bases and sustain strikes, but it forces the Pentagon to account for competition between the Middle East, Europe, and the Indo-Pacific region. Every interception of a cheap Iranian drone with an expensive missile becomes not merely a tactical success, but a strategic expenditure.
Tehran perceives this vulnerability. Its goal is not to defeat the US military, but to protract the conflict until the political, fiscal, and electoral costs outweigh the benefits of continuing the war.
In this logic, time becomes an Iranian weapon. Every month without a clear victory works against the White House.
However, this calculation carries a dangerous flaw. A politically weakened president does not necessarily grow more cautious. Conversely, he may attempt to regain the initiative through a demonstrative strike.
If an Iranian attack results in mass American casualties or the destruction of a major energy facility, domestic pressure on US President Trump could push him not toward compromise, but toward sharp escalation.
Saudi Arabia Has Ceased to Be a Bystander - and That Is Bad News for Iran
Until the summer, Riyadh attempted to maintain its distance. The Saudi leadership feared that direct involvement would transform the kingdom's oil facilities, ports, desalination plants, and cities into primary targets.
The experience of the September 2019 attack on Abqaiq and Khurais, which temporarily knocked out over half of Saudi production, demonstrated how vulnerable even a well-protected energy system remains.
Yet Houthi attacks on Yanbu, Jizan, and shipping tankers altered that calculus. Joint US-Saudi strikes on pro-Iranian groups in Iraq marked a qualitative shift: an Arab monarchy previously interested in mediation began acting as a combatant.
This expands the number of fronts for Iran and reduces the likelihood that Gulf states will press solely Washington to cease strikes.
The risk for Tehran lies in the formation of a coalition of states that differ in their stances toward the US, Israel, and Iran itself, but share a common interest: preventing maritime lines of communication from becoming a tool of permanent blackmail.
If Saudi Arabia, the UAE, Qatar, Kuwait, Bahrain, Oman, Egypt, and major Asian importers conclude that limited concessions merely encourage further crises, Iran's diplomatic isolation will deepen.
Controlled escalation works as long as surrounding states view negotiations as cheaper than resistance. It ceases to function once they decide that ongoing concessions are more costly than a collective response.
The Lesson of 1988: A Calibrated War Rarely Remains Calibrated
Iran previously attempted to utilize maritime choke points as a leverage tool during the Iran-Iraq War.
In 1987-1988, the US executed Operation Earnest Will - the largest naval convoy escort operation since World War II - to protect reflagged Kuwaiti tankers.
Following the mining of the frigate USS Samuel B. Roberts, Washington launched Operation Praying Mantis on April 18, 1988, inflicting heavy damage on the Iranian navy and maritime infrastructure.
The core lesson for Tehran was twofold. On one hand, threatening commercial shipping indeed draws great powers into negotiations and forces them to expend resources protecting transit routes.
On the other hand, a single misstep, a single mine, or a single attack resulting in American casualties can trigger a response that shatters a carefully constructed escalation ladder.
Present-day tactics appear more cautious than in the late 1980s. Iran employs a combination of coastal missiles, drones, vessel boardings, warnings, ambiguous transit rules, and proxy operations.
Responsibility is distributed among the IRGC, regular forces, the Houthis, and Iraqi formations. This complicates the selection of a single target for retaliation.
Yet technological sophistication does not eliminate political unpredictability. The greater the number of participants, weapon systems, and conflict zones, the less real control Tehran exercises over the chain of events.
A drone can off-course, a field commander can exceed orders, a proxy group can act in its own interests, and American intelligence can erroneously attribute a strike to Iran.
A managed war ceases to be a system of control and becomes a system of probabilities.
Four Scenarios: A Deal, Attrition, Coalition, or Explosion
Scenario One - A Maritime Deal with Limited Sanctions Relief
Oman or another intermediary secures a temporary transit arrangement in which Iran receives a politically acceptable role in providing security, without formal authority to block vessels or levy mandatory fees.
The US partially unfreezes assets, eases oil restrictions, and halts strikes. This represents the most rational exit, though it requires both sides to abandon publicly stated maximalist demands.
For Tehran, it is critical to frame such an agreement as recognition of its regional standing rather than a yield to American pressure. Washington, conversely, must demonstrate that freedom of navigation has been restored without paying political tribute to Iran.
Aligning these two objectives is extremely difficult, though not impossible. Formulations regarding technical, navigational, or environmental cooperation could mask the underlying political compromise.
Scenario Two - A Protracted Managed War
Strikes continue in waves, Hormuz functions erratically, the Houthis periodically strike Saudi facilities, and crude oil fluctuates within a broad range.
Reuters cited an assessment that Brent could move between $80 and $100 per barrel in the near term. Iran retains leverage, but its economy continues to degrade, while the US expends interceptors, funds, and political capital.
This scenario could endure longer than either side anticipates. Neither achieves enough to claim victory, yet each fears that easing pressure will be interpreted as weakness.
The war transforms into a self-sustaining system where strikes are conducted no longer to achieve an objective, but to forestall defeat.
Scenario Three - Formation of a Broad Enforcement Coalition
Saudi Arabia and the US expand joint operations, Arab nations provide infrastructure, intelligence, and air defense, and a naval coalition begins systematically escorting vessels while striking launchers, ports, and Iranian proxy facilities.
In this case, Tehran stands to lose its principal advantage: the ability to divide its opponents and force each to seek a separate deal.
Particularly dangerous for Iran would be the participation of major Asian importers. China, India, Japan, and South Korea are interested not in a US or Iranian victory, but in predictable energy supplies. Should they deem Tehran the primary source of instability, its diplomatic options will narrow sharply.
Scenario Four - Uncontrolled Regional Explosion
A major attack on a US base, a Saudi oil complex, Qatari gas infrastructure, or a passenger vessel triggers a massive campaign targeting Iranian energy assets, leadership, and remaining missile forces.
Iran retaliates across the region, while Hormuz and Bab-el-Mandeb are effectively shut down.
This is a scenario no party desires, yet it grows more probable with every new episode of calibrated escalation.
The longer a limited war persists, the greater the likelihood that its outcome will be decided not by strategic intent, but by an accidental strike, a technical malfunction, or a mid-level commander's decision.
Iran Transformed Weakness Into a Veto Right. But a Veto Right Is Not Yet Victory
Tehran's strategy is not irrational. Given US and Israeli military superiority, Iran cannot achieve victory through conventional means.
It therefore shifts the conflict to a domain where GDP size, aircraft counts, and bomb precision yield no automatic resolution. It attacks not the opponent's strength, but its patience, coalition cohesion, insurance markets, electoral calendar, and the global economy's reliance on narrow maritime corridors.
For now, this strategy produces results. Iran remains at the center of diplomacy, even as its infrastructure lies damaged. Its demands are debated, even as its economy contracts. Its authority over the strait is legally disputed, yet physically factored into calculations.
Even its adversaries are forced to ask what terms Tehran would deem acceptable.
Yet this leverage consumes itself in the owner's hands. Every day of crisis increases not only the price the world pays to Iran, but also the price Iran pays for the ability to present the bill.
Inflation, disrupted supply chains, brain drain, dependency on the IRGC, public discontent, and the growth of a regional coalition do not vanish simply because oil prices rise.
Tehran attempts to sell fire safety to the world while simultaneously tending the flames at two maritime gateways. Such a model can extract concessions so long as the fire remains contained. Should it consume the entire region, Iran will find itself not the master of the crisis, but its first and most exhausted casualty.
The primary error of the Iranian leadership may lie not in underestimating US military might. That power is understood all too well in Tehran.
Far more perilous is the belief that escalation can be endlessly measured, calibrated, and halted on command.
The history of Hormuz indicates otherwise. In a narrow strait between coercion and catastrophe, there is no safe driving lane.