The war between the US and Iran has reached a six-month mark, resulting in a costly stalemate where neither side appears ready to escalate or make concessions. The conflict, which began on February 28 with US and Israeli missile strikes on Iran, has led to an estimated 8,000-10,000 deaths and tens of thousands of injuries. The US has shifted its strategy from military strikes to an economic pressure campaign, with President Trump opting for a "wait and see" approach, hoping economic pressure will compel Iran to capitulate. However, experts like Gregory Brew of Eurasia Group note that Iran has been resilient despite facing its worst economic crisis since the 1980s, and a breakthrough does not look imminent. Both the US and Iran believe that time is on their side, with each hoping the other will be worn down by economic and political pressure.
The global oil market has been significantly impacted, with front-month Brent crude oil futures gaining almost 20% since the war began, though now trading a third lower than their April peak of $126.41 a barrel. The market is in backwardation, suggesting expectations of future price drops. The conflict has triggered a global oil supply crisis due to Iran's effective closure of the strategic Strait of Hormuz, through which over one-fifth of oil and natural gas supplies transited before the war. Shipping traffic has slumped from over 100 ships daily to about five, with Iran striking vessels that do not have explicit permission to pass, and the US imposing its own naval blockade on Iranian ports. This has led to severe disruptions in shipments of oil, derivative products, and liquefied natural gas, hindering Gulf states' economic diversification plans.
The economic impact on Iran has been severe, with the Iranian rial collapsing, food prices surging, and US blockades and sanctions cutting oil revenue by at least $6 billion. Despite this, Iran's Foreign Minister Abbas Araghchi stated that the country knows how to survive economic pressure. US consumers have also felt the economic strain, with gasoline prices doubling in states like California, contributing to the war's unpopularity. A July poll indicated two-thirds of Americans are against the conflict, and experts anticipate a political backlash against Republicans in upcoming midterms. Equity markets, however, have largely shrugged off the conflict's ramifications, with global stocks seeing a broad rally this year fueled by corporate earnings optimism.
While a shift from military to economic warfare has been announced by the US, experts suggest that a negotiated settlement remains bleak, as both sides are unwilling to make the necessary concessions. The conflict is settling into a war of attrition, with little hope for an immediate resolution. The international community, including Gulf states, fears a prolonged stalemate more than an outright war, as the continued disruption of the Strait of Hormuz hinders their economic stability and development.
