Friday marks six months since the United States and Israel launched a “major combat operation” in Iran, prompting retaliatory strikes on targets across the Gulf and sparking a new war in the Middle East.
The conflict was initially expected to last several weeks, but geopolitical analysts say the conflict has escalated into an open-ended situation. But the nature of the war is also changing, with the White House shifting its focus to increasing financial pressure on Iran and its trading partners, a strategy President Donald Trump has dubbed “Economic D-Day.”
However, the fate of the conflict remains extremely uncertain. Ships attempting to pass through the Strait of Hormuz continue to come under attack, peace talks appear to have broken down, and questions are floating about whether the Trump administration intends to expand secondary sanctions it plans on China, one of Iran’s largest trading partners.
A White House official told CNBC that the United States is now “into the late stages” of the war. The Iranian government has also been contacted for comment.
The market becomes accustomed to war
Amid continued uncertainty, crude oil prices remain volatile. Brent crude oil futures have risen almost 20% since the war began in the past month, but the contract is currently trading about a third cheaper than its April peak of $126.41 per barrel.
The oil market remains in backwardation. This is a phenomenon in which futures contracts with immediate or short-term delivery are sold at a premium to subsequent delivery, suggesting an expectation that prices will fall over time.
Stock markets have also largely avoided the potential impact of conflict, with global stocks gaining significantly this year as optimism in corporate earnings outweighed concerns about the war’s impact on the global economy.
brent crude oil price
I can’t see a breakthrough
As the war approaches its six-month mark, Middle East experts tell CNBC that the nature of the conflict appears to be changing, but a short-term breakthrough to end the war is unlikely.
“The conflict has reached a stalemate, and neither side appears prepared to escalate or make any concessions,” said Gregory Belew, a senior analyst specializing in Iran and energy at Eurasia Group.
Belew said the United States backed away from escalating attacks on Iran because of the risk of significant retaliation against Iran and concerns that another round of heavy fighting could further deplete ammunition stockpiles.
“Instead, President Trump has opted for a pressure campaign, a ‘wait and see’ approach, hoping that economic pressure will force Iran to surrender,” he told CNBC in an email, but added that a breakthrough “doesn’t seem imminent.”
He said President Trump’s so-called “Economic D-Day” is “unlikely to work.”
Brew added: “Iran has been extremely resilient in the face of U.S. economic pressure and is facing its worst economic crisis since the 1980s.” “Chinese leaders are more likely to resist and escalate than bow to U.S. demands.”
Will Todman, a senior fellow in the CSIS Middle East program, agreed that the United States appears to have pivoted to a new strategy.
“The ‘D-Day’ announcement of secondary sanctions against Iran was the clearest sign that economic warfare is now the Trump administration’s preferred strategy,” he said. “However, there is little evidence to suggest that an economic-focused strategy will force Iran to surrender or make more significant concessions in negotiations.”
Iran’s economy comes under pressure
Stephen A. Cook, senior fellow for Middle East and African studies at the Council on Foreign Relations, said the United States would likely respond militarily if American ships or personnel were attacked, but added that Iran’s leadership is prepared to endure great hardship and inflict great pain on its own people.
“This suggests they won’t give up or compromise anytime soon,” he said. “We don’t know how long this will last. The president thought the war would last four to six weeks. He didn’t expect them to resist effectively. The Iranians are now aware of the power of geography, and it appears they have no intention of giving up control of the Strait of Hormuz.”
Dennis Ross, a former U.S. diplomat who served as special coordinator for the Middle East under President Bill Clinton, told CNBC that it now seems clear that President Trump does not want to resume full-scale military operations.
“His new approach is to tighten the economic noose on Iran,” he said.
But Ross said that over the years, the Iranian regime has “become very good at circumvention and sanctions evasion.”
“However, the combination of the blockade and increased sanctions will put further pressure on Iran’s economy, which is already in free fall,” he said in an email. “That said, this Iranian leadership does not care about inflicting hardship on its people and believes it can outlast the president.”
He added that if the new approach succeeds in further significantly squeezing Iran’s economy, there is a good chance that Iran could escalate militarily or target its neighbors’ export capabilities.
President Trump told Al Jazeera on Wednesday that he is prepared to continue the Iran war as long as necessary. But experts said Washington’s goals are unclear, making it difficult for the White House to quantify the actual mission accomplished.
Measuring the success of the Iran war
“While the Trump administration has articulated broad goals, it has not yet defined what a U.S. victory would look like,” CSIS’s Todman said. “These range from ending Iran’s nuclear program to opening the Strait of Hormuz to regime change. Therefore, it is impossible to determine whether the United States will prevail.”
He added that it was highly unlikely that Iran would make the kind of concessions the president wanted.
“They feel emboldened by the United States’ ability to withstand a six-month war with Israel, despite having vastly inferior military capabilities.”
Michael O’Hanlon, director of research at the Foreign Policy Program at the Brookings Institution, said Trump “made the mistake of going into the war with unrealistic expectations about what it would entail and how long it would last” and settled on “the least bad option.”
O’Hanlon, who specializes in U.S. defense strategy, use of military force, and U.S. national security policy, added: “Whether we win or lose against Iran in a zero-sum sense, we should be concerned about three central things and keep our eyes on the ball: reducing violence, restricting (or) ending, restarting Hormuz, and putting a long-term lid on Iran’s nuclear program.”
“If we do that, our core strategic objectives will be realized, regardless of whether we have the bragging rights of ‘winning’ the war or not.”
