The United States stepped up attacks on Iran’s defenses and maritime capabilities for a ninth straight night into the early hours of Monday, prompting Iran to strike back with retaliatory strikes as warning sirens blared in neighboring Gulf states and Jordan, where there are U.S. military bases.
Both countries have accused each other of violating the Memorandum of Understanding (MoU) signed on June 17 in Islamabad, Pakistan. US President Donald Trump has said he believes the ceasefire is over, but that Iran no longer intends to abide by the memorandum.
Meanwhile, the Strait of Hormuz, through which 20% of the world’s oil and gas passed during peacetime, has been closed again, sending oil prices soaring again. The U.S. military announced Sunday that another U.S. service member was killed late last week, bringing the total number of deaths to 17.
So what has changed for the United States, Iran, and the Gulf states in the past two months as this memorandum unravels in terms of economic impact, expanded military objectives, and views on war?
economy
The Strait of Hormuz, a kill switch for the global economy, has been shut down by Iranian authorities who have warned that not a single drop of oil should be allowed to pass through the waterway amid a US attack and naval blockade of Iranian ports.
This memorandum paved the way for the reopening of the Strait. As a result, crude oil prices temporarily fell to pre-war levels.
GCC
The strait is particularly important for the Gulf Cooperation Council (GCC) countries, whose economic security and energy strategies are severely affected by export restrictions. The war against Iran has caused the greatest disruption to global oil and liquefied natural gas (LNG) supplies in modern history.
Mohammad Reza Farzanegan, an economist at the University of Marburg in Germany, points out that the cost is not just the loss of energy revenue.
“The conflict also threatens the diversification strategies of GCC countries. Tourism, aviation, logistics, construction, real estate and foreign investment all depend on the perception of stability in the region,” he told Al Jazeera. “As the war continues, insurance and transportation costs increase, causing investors and tourists to reconsider their involvement in the region.”
Iran
For Iran, the memorandum lifted a naval blockade on Iranian ports, provided exemptions from oil and banking sanctions, and prompted Tehran to expedite exports of tens of millions of barrels of crude oil.
Iran’s exports have been curtailed by the recent economic blockade imposed by the United States, and Iranian parliament speaker and chief negotiator Mohammad Bagher Ghalibaf said in an interview on Iranian state television last month that during the blockade, “we did not export a single barrel.”
However, as fighting resumed, the United States disabled ships believed to be transporting Iranian crude oil in the Strait of Hormuz. Tehran has also attacked commercial ships in the waterway, and the US has since bombed Iranian coastal areas.
“(Reinstating the U.S. naval blockade) is more harmful than traditional sanctions because it physically tightens the restrictions,” Farzanegan said. “Therefore, there is much less scope for Iran to use intermediaries, alternative flags, and informal transportation arrangements to maintain oil exports.”
“The immediate impact is a decline in foreign exchange earnings, further depreciation of the rial, and increased inflationary pressures,” the economist told Al Jazeera.
Iran’s economy suffers from one of the highest inflation rates in the world. This week, the rial hit a record low of nearly 1.9 million rials against the US dollar. Tehran Stock Exchange’s main index fell another 120,000 points (2.4%) on Saturday to 4.77 million points.
US
President Trump’s war is widely unpopular in the United States. The latest CNBC poll reports that the president has a 60 percent disapproval rating on the economy, with a net approval rating of -22, the lowest of his political career.
The poll found that 61% of respondents said they were pessimistic about the state of the economy, the highest percentage since December 2023.
“The impact will be most evident in energy prices and consumer purchasing power, which will increase household costs and complicate the political positions of President Trump and Republican candidates ahead of the November 2026 Congressional elections,” Farzanegan said.
army
US
The US military has killed 17 members so far in the war with Iran. Three of them have died since the war resumed about 10 days ago.
“We hit them very hard again tonight,” President Trump said Sunday, adding, “We did it in honor of probably three great patriots.”
Two U.S. service members were killed and a third is missing in an Iranian attack on a Jordanian air base on Friday. Last week, another soldier was killed while disposing of an unexploded ordnance from an Iranian drone in Iraq.
The Iranian government claims it has attacked multiple U.S. military facilities in Kuwait, Bahrain and Jordan, including aircraft at Aqaba airport.
Al Jazeera could not immediately confirm the extent of the damage to the facility.
Gulf Coast
Iran’s renewed attacks on Jordan, as well as most Gulf states, are forcing countries to deploy interceptors. GCC countries had already used hundreds of expensive interceptors in the first phase of the US-Israel war against Iran in March and April.
However, Iranian military attacks have also taken a toll on civilian infrastructure in the Gulf. The bombing of power plants and desalination plants in Kuwait has drawn widespread condemnation across the region.
“What is happening is a serious shock for the GCC countries,” Iranian-American economist Nader Habibi told Al Jazeera. “After the past seven months of turmoil, civilians are being affected indirectly, even if they are trying to avoid involvement.”
Iran
The United States says it has focused its attacks on Iran’s military infrastructure, particularly on islands in the south that serve as forward military bases, surveillance sites, and where missile bunkers are believed to be located.
But in recent days, the Iranian government has accused the United States of also targeting civilian infrastructure such as bridges and tunnels, ports and wharf facilities, power plants and water stations. Iranian authorities say more than 50 people have been killed and about 500 injured in U.S. attacks over the past three weeks.
story
More than the war itself, a key part of the message from the United States and Iran was about control of the Strait of Hormuz.
US
The U.S. government said the new attacks were aimed at reducing Iran’s ability to disrupt maritime traffic in the waterway, with President Trump saying last week that “the United States controls the strait.”
Iran
The Iranian government pushed back on President Trump’s claims.
Farzanegan said Iran’s “ability to influence shipping through the Strait of Hormuz remains a source of its own bargaining power.” “The Iranian government is therefore prepared to incur significant costs to maintain this influence.”
He added that Iran may be calculating that by extending some of the economic costs to neighboring oil-exporting countries, it will encourage those governments to use their political influence in Washington and push the United States toward negotiations.
“This appears to be one reason why Iran is prepared to maintain pressure in the strait despite the significant costs to its economy,” the analyst added.
Anise Tabrizi, an associate fellow in the Middle East and North Africa Program at Chatham House think tank in London, said the big change since the Memorandum of Understanding was “less optimistic about whether diplomacy is possible”.
“It is difficult for any side to foresee a scenario in which a new agreement is not only reached but successfully implemented,” he told Al Jazeera. “And that is particularly concerning for everyone involved.”
Tabrizi said there appeared to be “no imminent movement” from Iran to sign the deal. “They are still carrying out escalating attacks, but they are also retaliating for the types of attacks that are being carried out against the country,” she said.
Gulf Coast
GCC countries continue to condemn Iranian attacks on countries in the region, while calling for diplomatic de-escalation. They have made it clear that Iran’s unilateral control of the Strait of Hormuz is unacceptable.
Tabrizi added that regional countries, especially Qatar, are still open for talks, as they were in the weeks before the Islamabad Memorandum was signed.
If anything, the economic damage could bring all parties back to the table, Farzanegan said.
“The greater the economic loss, the greater the incentive to negotiate,” he said. “If both sides conclude that continuing escalation will not improve their negotiating position, a return to negotiations becomes more likely.”
Economist Habibie agreed that if another deal were reached, “it would mainly be to stabilize economic pressures on both sides.” But he added that escalation in the coming weeks was more likely than negotiation.
