Iran Controls Hormuz, US Faces Escalation Trap Ahead of Midterms

Iran is currently in a stronger position than it was before the war began, a scenario that has long been a concern. The global economic crisis is expected to intensify in the coming months, largely due to the ongoing conflict.

The current situation is the result of two decades of modeling the bombing of Iran, with advice provided to every White House administration from 2001 to 2024. The world is approaching a critical point, likened to the Titanic hitting an iceberg, with a potential global oil shortage. Adding to this, Iran is attacking US bases in Jordan, and the US has been bombing Iran for nine consecutive days. The challenge of eliminating Iran's drone and missile threat is far greater than commonly understood due to their widespread concealment.

The Risk of Ground Operations in Iran

The risk of a limited US ground operation in Iran is nearing 70% and could materialize by the end of the week. A significant concern is the potential for terrorist attacks, as controlling homeland territory is a major risk factor for suicide terrorism. The dilemma is whether to face a global economic crisis, possibly a recession or worse, or allow Iran to control the Strait of Hormuz.

The Failed Memorandum of Understanding (MOU)

A memorandum of understanding (MOU) was reportedly close to being signed with Iran to end the war. However, this agreement was fundamentally flawed. Vice President Vance, who was involved in the negotiations, approached it as a business deal, offering financial incentives to Iran for keeping the Strait of Hormuz open. This perspective, while potentially effective in real estate, misinterprets international politics, where the balance of power is paramount.

Before the war, the US was ascendant, Israel was a rising power, and Iran was in decline. Within two weeks of the war's start, the balance of power shifted dramatically as Iran gained control of Hormuz. This control represents significant future wealth and military power, enabling Iran to influence other regional states and build a sphere of influence.

The MOU, as drafted, would have solidified Iran's control of Hormuz and effectively made it the regional hegemon, the dominant state in the Persian Gulf and the Middle East. Iran signed the agreement, which included points that President Trump had previously rejected in April. For instance, Article 5 stated that Iran would manage arrangements for Hormuz and would not charge for 60 days, implying future charges determined by Iran and Oman, with no US involvement. This clause effectively granted Iran control over the Strait and the discretion to set fees indefinitely.

Why the MOU Failed and the War Resumed

The document was confirmed as authentic by both the Iranian government and the White House. Controlling Hormuz means controlling 20% of the world's oil, providing immense strategic power. However, Iran's ambition extends beyond Hormuz. Countries like Saudi Arabia and the UAE have already developed pipelines to bypass the Strait, making Hormuz a declining asset if it's the only point of control. Iran seeks a broader "security resistance belt" from the Mediterranean to the Red Sea to the Gulf, aiming to control all oil transit routes and prevent bypasses. This is where Article 1 of the MOU comes into play, which the US violated.

President Trump signed the MOU, acknowledging that the world was four weeks away from running out of oil and he wanted to open Hormuz. However, within 48 hours, his administration began undermining and violating the agreement:

1. Secretary Rubio's Framework Accord in Lebanon: This agreement aimed to lock in Israel's military presence in Lebanon, directly contradicting Article 1 of the MOU, which guaranteed Lebanon's territorial integrity.
2. Encouraging Southern Passageway Transit: President Trump encouraged ships to use the southern passageway through Hormuz without coordinating with Iran and often with transponders off, directly contravening Article 5. He even boasted about this on social media.
3. Frozen Assets: Article 11 stipulated that Iran's frozen assets would be unfrozen, with Iran having exclusive rights to determine their use. President Trump stated that Iran could have the money only if it was used to buy American grain, a third violation.

These violations led Iran to restart attacks on ships in the Strait of Hormuz, as they saw the US undermining their path to becoming a regional power. This is a matter of great power politics: Iran desires regional dominance, and the US opposes it.

Iran's Increased Strength and the Drone Threat

The war has undeniably strengthened Iran, as it now controls the Strait of Hormuz and can threaten any ship passing through. Despite US claims of destroying Iran's air force, navy, and missile capabilities, Iran continues to hit US bases. This is because Iran entered the war with thousands, possibly tens of thousands, of drones and missiles. Even after significant destruction, they have enough remaining to conduct saturation attacks, overwhelming US defenses.

Iran primarily used intermediate-range ballistic missiles in March, then shifted to drones. Recently, they have resumed using ballistic and cruise missiles against multiple targets, demonstrating a full and well-stocked arsenal. The US, conversely, might be running low on interceptors.

The difficulty in eliminating Iran's drone capability stems from their small size and widespread concealment in "drone caverns" and warehouses across a vast, mountainous area larger than California. Finding these drones is akin to finding a truck in California. Furthermore, Iran is continuously manufacturing new drones, estimated at 55,000 per year, making it impossible to eliminate the threat entirely.

For the Strait of Hormuz to reopen, shipping companies need to be convinced of safety, which requires more than just destroying a few drones. A single tanker with a full load of oil is worth $300 million, and crews are unwilling to risk their lives. This has led to more ships leaving the region than entering, with those entering primarily heading to Iranian ports.

The Impending Economic Crisis

The world is on the verge of an economic crisis. The 20 million barrels of oil that once passed through Hormuz have been significantly reduced. Saudi Arabia and the UAE bypassed 7 million barrels daily, and the US released 5-6 million barrels per week from its Strategic Petroleum Reserve (SPR) starting in mid-March.

President Trump authorized the release of 172 million barrels from the SPR over 120 days, part of a coordinated effort by 32 International Energy Agency nations to release 400 million barrels. This massive drawdown has depleted the US SPR to its lowest level since 1983, a 40-year low. This cushion is now gone, and the world is facing increased risk.

Compounding the issue is the global refining capacity. Much of the world's refining capacity is in the Persian Gulf, and its disruption, combined with attacks on Russian refineries, has severely strained the supply of refined products like gasoline and diesel. This situation aligns with President Trump's earlier warning that the world would run out of oil in four weeks.

The choice now is between a global economic crisis or allowing Iran to control the Strait of Hormuz. President Trump, unwilling to "own the loss" of Iran controlling Hormuz, has chosen to risk the world economy. Owning the loss would mean accepting Iran's control and setting a precedent for other nations and non-state actors to control choke points.

The Escalation Trap and Midterm Elections

The current situation is an "escalation trap," a historically predictable pattern. The stages of escalation are:

1. Limited Strike: Bombing leadership to topple the regime, leading to retaliation.
2. Retaliation: Iran takes Hormuz, followed by US bombing campaigns and blockades.
3. Economic Crisis: The current stage, where the choice is to either let Iran become a regional hegemon (potentially leading to nuclear weapons in a few years) or physically take back Hormuz.

The critical question is whether the US can physically open the Strait of Hormuz between now and the midterm elections. The answer is likely no.

President Trump's statement at the G7 summit in June 2026, admitting that global energy reserves would run out in about four weeks, highlights the urgency. He made this statement to explain why he signed the MOU, to avoid global economic chaos. However, by undermining the MOU, he has pushed the world closer to that crisis.

The midterm elections, three months away, add another layer of pressure. If gas prices remain high, it could negatively impact Trump's approval ratings and lead to Republican losses in Congress, making him a "lame duck" president. He is desperate to open Hormuz before the crisis fully hits, even pursuing high-risk military options that are unlikely to succeed.

This situation mirrors Lyndon Johnson's dilemma during the Vietnam War, where he escalated despite knowing it was unlikely to work, hoping for a "rabbit out of a hat" to protect his domestic agenda. Trump is taking similar risks, potentially leading to a similar political downfall.

The Most Probable Next Steps

The most probable next development is a mass casualty attack against American troops in the Middle East, specifically a barrage of ballistic missiles against US naval ships in the Gulf of Oman. Iran has demonstrated exquisite targeting ability.

Another major concern is a terrorist attack, potentially against American civilians, anywhere in the world. The threat of ground occupation, which the US is now considering, is the biggest risk factor for suicide terrorism. This could involve attacks on commercial airliners or hotels where American businessmen are staying. The US State Department has already advised Americans to leave the region.

The spiral of escalation is two-sided, with both Trump and Iran escalating. If a mass casualty event occurs, it will likely harden support for the war in America, leading to intense calls for continued conflict to prevent future attacks.

Suicide Terrorism and Ground Operations

Suicide terrorism, the "lung cancer of terrorism," is the biggest killer in the category of terrorism. The key risk factor for suicide terrorism is military combat presence on territory the terrorist group prizes. It's not just about killing people; it's about the political control that comes with ground forces, which is seen as a deeper violation of local populations' way of life.

The US cannot force the Strait of Hormuz fully open with its current strategy. The concentration of US naval forces and Marine Expeditionary Units in the Gulf of Oman suggests a potential limited ground operation to seize and hold a piece of Iranian territory, such as Chabahar or Jask. This would be a symbolic victory for Trump, allowing him to show he "fought back."

Such an operation would inevitably lead to American casualties, which would be politically divisive. While opponents of the war would be further alienated, a significant portion of MAGA supporters would likely rally behind the troops and the war effort. Historically, initial casualties can harden support for a war.

The risk of such a ground operation is over 50%, possibly 70%, and could happen within the next month or even by the end of the week. This is driven by the growing economic crisis and Iran's escalating actions, such as the Houthis closing the Red Sea oil flow.

The "Forever War" and the Midterms

There is no achievable off-ramp that restores free shipping through Hormuz and allows the US to retract without appearing to have suffered a strategic defeat. The opportunity to declare victory and walk away, or to militarily contain Israel, has passed.

The only potential "way out" is if the midterm elections lead to Democrats controlling Congress, who could then cut off funding for the war, as happened in Vietnam in 1974. However, President Trump could attempt to bypass such restrictions, leading to a constitutional crisis.

The upcoming midterms are considered the most dangerous elections in a lifetime due to the growing tensions from the Iran war and domestic political violence. The collision of these two crises could resemble the chaos of the 1960s, with mass demonstrations, anti-war violence, and assassinations.

The outcome of the midterms could be influenced by a mass casualty attack. Such an attack would likely increase the odds of Trump and Republicans winning, while a world economic crisis without such an attack would likely lead to Republican losses.

The US air campaign is sustainable in terms of bombs, as dumb bombs can be converted into precision bombs with relatively inexpensive kits. However, there is a risk of running out of interceptors, as stocks are being drawn from Asia and Europe.

President Trump's objective between now and the midterms is a symbolic victory, a short-term win to demonstrate he fought back and to frame it as a precursor to greater success if his supporters allow him to win. He is stuck and likely knows it.

If President Trump were to seek advice, the recommendation would be to design a multi-year strategy to build a better balance of power in the region for long-term stability, rather than focusing on short-term electoral gains.

Russia and China have different perspectives. China desires global stability but does not want Iran to be "smashed." Russia sees an opportunity to economically squeeze Europe, especially as Ukraine puts pressure on supply lines to Crimea. Russia is likely to escalate pressure on Europe as the global economic crisis grows due to the Iran conflict.

The prediction for the next few months is that the US will cross the threshold into ground operations in Iran, driven by the growing economic crisis and President Trump's desperation for a symbolic victory before the midterms. This will be a "down payment" on a plan to open Hormuz, even if it's not a real solution.

It is crucial to remember the human cost of this conflict, particularly for the 90 million Iranians caught in the middle. The hope for the Iranian people is five to ten years away, and escalation pushes it closer to ten.