As the US-Iran war draws toward its six-month anniversary, and a barely month-old ceasefire collapses, there is little reason to believe the trajectory of the conflict will change soon. Oil markets, and consumers, should prepare for the possible worst-case outcomes and accept that “normal” is now a figment of the past.
The weary pattern of this conflict—sporadic kinetic action, talks of negotiations, retrenchment and then resumption of conflict—is becoming old news for those who read the signals surrounding oil and gas markets. But this situation makes it difficult for either side of this war to achieve a breakthrough and end the conflict on their preferred terms. Fundamentally, both sides’ central (and diametrically opposed) aims have never changed; so far, negotiations have failed to move the needle and military force is only marginally more likely to prove decisive.
Mistakes were made
The reasons why lie in how the United States got here to begin with—namely, the Trump administration’s misreading of how the Iranian regime perceives this conflict.
After its initial decapitation strategy failed, the White House turned to the next best option: a negotiated settlement out of what was becoming a globalized energy crisis. In normal circumstances, repeated negotiations would eventually yield sufficient compromises to avoid or end costly military operations. Indeed, such an approach has worked before in the creation of the Obama-era Joint Comprehensive Plan of Action (JCPOA), which was intended to prevent the very war we now find ourselves mired in.
The Trump administration believed it had achieved a temporary compromise solution back in June when the ceasefire was formally announced and modest energy transit revived through the Strait of Hormuz. From the administration’s perspective, the concessions it offered in the Memorandum of Understanding (namely, pushing the nuclear issue down the road and enticing Iran to keep the strait open with billions in unfrozen monies) should have been more than enough to convince a battered, desperate Iranian regime to let oil flows resume as normal. Surely, the White House must have reasoned, a return to the status quo ante with additional perks would be good enough to give everyone a pathway out of crisis.
From Iran’s perspective, however, this conflict is not a matter of trading concessions or securing a few perks; it is an existential conflict that the Islamic Republic has spent decades preparing for. This profound misreading of the other side’s intentions, and apparently also hard capabilities, laid the groundwork for the ceasefire to collapse even at its inception.
The status quo ante was never an acceptable resolution for the Iranian regime. Rather, it is determined to emerge from this conflict not only internally strengthened, but also the de facto manager of the world’s most important trade and transit route. US attempts to pressure tankers into using the so-called Omani route are thus a direct challenge to what Iran views as its rightful prize and long-term regional insurance plan. The lack of clarity around Hormuz’s future as a free waterway was an especially glaring omission in the MOU which abetted the Iranian regime’s claims of ownership.
Moreover, while both sides believe they can outlast the other, the Iranians have a stronger case to reassure themselves of their own endurance and ability to secure everything they want whenever and however the war runs its course. After all, the United States never stays in any part of the Middle East for forever and cannot run naval escorts or blockades in perpetuity.
Now what?
The latest announcement from President Trump—that the United States will both reinstate the naval blockade and require a 20 percent payment (already scrapped) for guarding vessels it presumably escorts through—is the final nail in the coffin for the June iteration of the ceasefire. To be sure, there will inevitably be “new negotiations” announced and talks resumed once again to give the illusion of forward progress on the substantive points of disagreement. But the reinstatement of the US blockade is an unavoidable signal that the White House has few ideas left to meaningfully change the conflict’s dynamics.
The Iranians, meanwhile, took considerable damage this weekend from renewed US volleys but also inflicted damage themselves, implying that their defensive and offensive capabilities remain viable (the ceasefire period likely enabled rearmament and preparation for renewed conflict). As the latest analysis from the Institute for the Study of War summarizes, “[r]ecent US strikes have attempted to degrade Iran’s ability to attack commercial shipping, but it remains unclear when Iran’s ability to attack commercial shipping will be degraded sufficiently to prevent individual attacks that disrupt shipping.” If Iran has retained these crucial capabilities, at manageable costs, throughout the months duration of this conflict, then it stands to reason that Iran can retain said capabilities for months longer.
All of this leaves the United States, its allies, and a world still dependent on the free flow of fossil fuels with precious few options. Transit through Hormuz, which had only mildly recovered during the brief ceasefire, is set to slow back to a crawl. Oil prices are under pressure again, with the Brent benchmark rising 10 percent just since Sunday, and there are signs that the Yemeni Houthis are being activated for the first time in the conflict following recent attacks they have claimed on Saudi infrastructure. If the Houthis, with Iran’s support, undermine transit in the Bab el Mandeb Strait, another four million barrels per day of oil transit could be under literal fire, further exacerbating market tensions. Little wonder that the latest International Energy Agency analysis asserts that the prospect of a supply surplus next year could be pushed further and further away if the crisis lingers.
For now, there is no sign of a military, political, or other breakthrough that could change the trajectory of Middle Eastern affairs. The accelerating efforts to plan and build expensive Hormuz workarounds—including multiple new pipelines to crisscross the Arabian Gulf—confirm that the region’s oil producers see no one coming to save them, and do not believe a durable solution is anywhere on the horizon.
Until one appears, the current cycle of dashed hopes will persist, and energy markets will struggle to read the signals and understand how much oil is actually available as strategic reserves dwindle ever lower. Sooner or later, the realities of physical market supply availability will become unavoidable, with serious implications throughout the world but especially developing economies that have already endured tremendous hardship throughout this crisis. New emergency measures—beyond those already deployed—may become necessary. Thoughtful officials should consider what those options might be sooner rather than later.
Much commentary has been made of how the most dire prognostications at the start of the war—that oil could surge over $150 per barrel—did not occur. But that commentary has assumed the worst was past. In fact, the worst may be yet to come.
David Goldwyn is chairman of the Atlantic Council’s Energy Advisory Group and a former special envoy for international energy affairs at the US Department of State and assistant secretary of energy for international affairs.
Andrea Clabough is a nonresident fellow with the Atlantic Council Global Energy Center.
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Image: FILE PHOTO: Vessels are anchored in the Strait of Hormuz as seen from Musandam, Oman, June 3, 2026. REUTERS/Stringer/File Photo//File Photo