Despite the multiple exchanges between the US and Iran since the ceasefire was announced on April 8, war may be imminent. Iran firmly controls the Strait of Hormuz while America maintains a belligerent, albeit porous, blockade of the channel, enabling both sides to reciprocate threats, fire and claims of relative destruction.
This cannot last. Neither the ostensible reason for starting the war, Iran’s enrichment of uranium, nor its most proximate global impact, Iran’s restraint of the Strait, can be surrendered or accepted by either side to guarantee a lasting peace. In fact, America’s need to protect the petrodollar and Iran’s desire for autonomous economic growth, have become irreconcilable.
Thus, despite Trump’s intermittent assurances, which serve no purpose except, perhaps, to enrich family members, cronies and other speculators who short oil futures, Iran holds all the cards. Its core demands are consistent. It wants the US to pay reparations, lift all sanctions, quit its military presence in the Gulf, restrain Israeli depredations in Palestine and Lebanon, and guarantee a pact of non-aggression. In exchange, it will allow merchant ships to transit the Strait. It is unwilling to discuss nuclear concessions at this time.
For America, this presents an intractable problem. To acquiesce to Iran’s economic terms is to accept defeat, signalling that the war is more expensive than surrender. To offer Iran peace guarantees is to signal that it is not an imminent threat to the United States, effectively putting an end to both Israel’s false narrative about the Iranian peril and its own hopes for territorial growth. Finally, to vacate its military bases would constitute the dereliction of pliant Arab allies that, in addition to patronising the US arms industry and subsidising the deployment of US forces, fund American debt through petrodollar re-investment in US treasuries.
Therefore, escalation is certain. Only its ending – in either fire or ice – is not.
In the former eventuality, there is likely to be a major buildup of US ships, planes, munitions and troops over the summer months when starting a war would be foolhardy – utilising the defence budget which was increased in 2026 by 17% and arguably pressing Congress for more – while prolonging negotiations and maintaining the semblance of a blockade. By the time America is ready for a fresh offensive it could be autumn, because it would take months to mobilise sufficient service personnel and replenish, even inadequately, its severely depleted arsenal of offensive Tomahawk and JASSM, and defensive Patriot and THAAD, missiles.
Iran anticipates this and is prepared to meet the challenge. As such, if the US engages on land and at sea, it could be defeated, not least because if Iran cannot secure victory by itself, Russia and China will tip the balance. The entry of other willing and reluctant players – the EU, Japan, Australia, South Korea, Turkey, Egypt, Pakistan or India – will only prolong the conflict without altering the outcome.
The deleterious impact could affect the world for decades.
In the latter eventuality, if the US chooses a cold war, Iran could restrict oil flows from the Persian Gulf and the Red Sea for months, bolstered by overland oil shipments to China and elsewhere, elevating global crude prices to unsustainable levels, and precipitating a global depression. Deprived of petroleum and gas, and beset by soaring inflation, Europe may be the first casualty. As crop yields dramatically diminish along with urea supply, millions could starve. And as its trade partners begin to wobble, the US will sink into an economic quagmire. 2-year and 10-year bond yields have already risen to 3.96% and 4.42% respectively. As these breach the 4% and 5% mark respectively, the ~$1.5Tn incremental annual interest payments from reissuance will become unsustainable.
At this juncture, the US Congress may force Trump to end the war: by removal or legislation. This, however, will definitely be opposed by the Israeli regime, which will view capitulation as a betrayal of Zionist expansionism and a death sentence for its criminal leadership. It will then become incumbent on countries like India – which initially and ill-advisedly supported Israel and America through silence, before inflicting austerity measures and price inflation on its citizens – to join with other BRICS+ nations and force America to quit the region.
The economic fallout will be extensive, especially with regard to restarting and rebalancing oil production, but less devastating.
No matter the manner of the conclusion, three outcomes are probably inevitable. First, petrodollar hegemony will end, and with it cheap debt-fuelled American growth, adversely affecting its military-industrial and techno-financial complexes. The US will not be replaced by any single country. Rather, it will enable a more multi-polar world if even a few global heavyweights force the issue. Second, Iran is likely to emerge as the preeminent regional power, quickly transforming into a developed nation, even as it begins to loosen the bonds of theocratic rule. Finally, Israel and some GCC states may be completely overhauled, the former forced to de-Zionise, de-militarise, and recognise an independent Palestine, while the latter could be transformed into democratic republics.
Ultimately, from what we know of Israel’s designs, Trump’s desperation, and Iran’s determination, the odds are stacked with those who favour fire. For the rest of the world, ice will more than suffice.
