The ceasefire that ended US President Donald Trump’s war against Iran, and memorandum of understanding between the two countries cemented both appear to be dead letters following the military escalation in the Persian Gulf and the economic boom from Washington.
The inevitable question is: What? The answer is that no one knows.
The ceasefire that ended US President Donald Trump’s war against Iran, and memorandum of understanding between the two countries cemented both appear to be dead letters following the military escalation in the Persian Gulf and the economic boom from Washington.
The inevitable question is: What? The answer is that no one knows.
The whole reason the Trump administration signed the memorandum of understanding (MOU) with Iran was to open the Strait of Hormuz, a vital shipping channel, and to end a bombing campaign that did nothing to change Tehran’s strategic calculus. Three weeks later, the ceasefire is in effect”up,” according to Trump; important part of the MOU has collapsed; oil prices are rising again; and Iran’s regime appears to be more difficult than ever.
“Everyone expected at some point that the MOU would be tested. I think that time has come sooner than expected,” said Ellie Geranmayeh, senior policy and deputy head of the Middle East and North Africa program at European Council on Foreign Relations.
What caused all this is Iran attacked several ships passing through the Strait of Hormuz earlier this week because they were using the route bordering the coast of Oman and is not under the supervision and control of the Iranian regime. On Tuesday, Trump responded to the attacks on Iran with a wave of air attacks on radar installations, air defense areas and other targets. (He also suggested on Wednesday that there could be more strikes to come.) None of them match the spirit or letter of the MOU, which begins with a pledge by both countries to refrain from hostilities.
“I think it’s over,” Trump he said on a ceasefire with Iran, speaking at a NATO summit in Turkey on Wednesday. “I don’t want to deal with them anymore. … They’re sick people. They’re led by sick people, and they’re rude and violent people. And if they had a nuclear weapon, they would use it. As far as I’m concerned, it’s over.”
What is not over, despite the false dawns of the past three weeks, is the drama for the oil industry and the wider global economy. When the United States launched airstrikes, it also lost economic status to Iran, cancel a temporary waiver of sanctions that Trump offered on Iranian oil sales as part of the MOU.
That may not make much of a difference in reality, because most buyers were still treating Iranian oil with a 10-foot pole, and those buying (China) will continue to do so with or without Washington’s approval. Any discount that Iran gets from the return of illegal oil sales will be offset by higher international oil prices. Brent crude jumped on Wednesday to around $80 a barrel, after weeks of flirting with the upper $60s.
Iran took advantage of the end of the US embargo to export oil to buyers in Asia. Estimates vary, but in the three weeks since the MOU, Iran looks that way they have exported approximately 60 million barrels of oil, amounting to 4 billion dollars before the release of the pledge of blocked Iranian funds that were also part of the MOU.
What could make a difference is the reinstatement of US sanctions against Iran, a concept that Trump floated Wednesday at a press conference in Turkey. That could blow up any remnants of the fragile peace deal, but it may be the only way Washington has to win a fight it lost weeks ago.
“The Strait of Hormuz was meant to be Trump’s real success, but it is no longer there. If the US continues and reimposes its sanctions, we will return to the ‘ceasefire’ that lasted from April to June,” Geranmayeh said.
The return of fighting in the region, after a few weeks of peace, is a cold rain for oil producers who are trying to unload the oil stored in ships that were previously captured and figure out how to restart production in fields that were idle during the war. Fat bears may have to hibernate this summer.
But the breakdown of the ceasefire speaks to a deeper disagreement between Washington and Tehran over what has become a bigger issue, overshadowing even the nuclear portfolio: What is happening to Hormuz? According to the MOU, which Trump personally signed, Iran is responsible for preparing ships in the strait during the bilateral negotiations, and after that, it will have a say in creating a new shipping system that can include. some kind of taxtoll, or otherwise levy to allow ships to leave the Persian Gulf cul-de-sac.
Iran insists it will not relinquish its control over the vital shipping lane. Iranian Parliament Speaker Mohammad Ghalibaf he said on Wednesday that the US violated the MOU by not obeying Tehran’s rules of the road for shipping.
“Seeing from the Iranian side, Hormuz is now important as an enrichment right,” Geranmayeh said. “They know that American policy can change at any time, but geography never changes.”
The United States, despite signing Iran’s control of the strait, does not see it that way and has continued to escort ships through alternative routes, sometimes under the protection of the US Navy. That’s one reason why Hormuz shipping traffic rebounded from near zero to more than a third of its pre-war levels in recent weeks. The ceasefire is not paralyzed traffic not yet, but it can, at a time when the international oil inventory remains stretched.
But if the war that began in late February and ended in June isn’t over, where does that leave the Trump administration’s plans to confront Iran, its nuclear program, its support for terrorist allies, and its renewed influence over the Strait of Hormuz? US Secretary of Defense Pete Hegseth and Vice President JD Vance both he promised that Trump’s war with Iran would not be an “eternal war,” although it is beginning to feel that way.
Trump “is like a mouse that walked through a glue trap,” said Richard Nephew, a sanctions expert at Columbia University and a former US government official. “No one can win by fighting, but both think they’ve won. This is a story we’re still in the early stages of.”
