After more than six months of war and with over 750 American soldiers wounded or killed in clashes with Iran, US President Donald Trump plays his final card in order to salvage his credibility and avert a rather inevitable humiliation.
Donald Trump is once again shifting strategy toward Iran, betting this time not on overwhelming military power, but on the economic asphyxiation of the regime in Tehran.
However, many analysts point out that Tehran has endured decades of economic pain and sanctions, assessing that it will not back down...
That is why the most critical question is not only how much economic pain Iran can endure, but also how much political and economic cost Donald Trump himself is willing to pay before being forced to alter course once again, given that gasoline prices continue to squeeze American voters ahead of the midterm elections on November 3.
In any case, all indications suggest that the conflict in the Persian Gulf is evolving into a war of attrition, with the current situation in the Strait of Hormuz signaling that the military confrontation will persist at least through 2027...
Yet another strategy
US President Donald Trump introduces yet another strategy for the war with Iran in his familiar fashion: with a threat written entirely in capital letters.
Yet the world, as usual, will have to wait to see whether he backs down when the political cost begins to mount.
Donald Trump promised on Wednesday «THE MOST CRUSHING ECONOMIC OPERATION EVER CONDUCTED AGAINST ANY COUNTRY» in a post on Truth Social.
An effort... at salvage
His new approach constitutes, in a way, an effort to salvage his credibility after failing either to bomb the Islamic Republic into surrender or to draw it into nuclear negotiations with concessions under a memorandum of understanding.
This represents the latest in a series of disorienting pivots in a conflict that has generated more tactical shifts and reversals of course than can be counted.
No talks
The President has broken off all talks with Iran and, according to CNN, his team has informed political allies that he is now pivoting toward a war of economic attrition, which he believes will dismantle the Iranian economy and compel the country to capitulate.
«Right now, I think the situation is so good», Donald Trump said on Wednesday, August 19, regarding a war he had declared victorious after just a few days, but which has now advanced deep into its sixth month.
Threats
In a subsequent social media post, he pledged to take strict measures against any country that permits its financial institutions, businesses, airports, or government bodies to provide any form of lifeline to Iran. He wrote: «Oil smuggling, swap lines, cash transfers, currency exchanges, ship registries, front companies - all of this must stop NOW».
«You know who you are», the President added.
Tehran will not back down
Many analysts doubt that the revolutionary regime in Tehran, known for severe crackdowns and the harsh economic privations it imposes on its citizens, will back down in its existential struggle with the US.
After all, it has withstood decades of some of the strictest economic sanctions in the world.
«Those who think Iran will collapse under pressure, I think are wrong, despite the economic situation», said Daniel Citrinowicz, who served in Israeli military intelligence, including as head of the Iran branch in the Research and Analysis Division.
Citrinowicz told CNN International that there is no indication Iran is easing its strategy of exerting pressure on Donald Trump through international markets.
He added that while economic pressure could impose very severe costs on Iran, «at the end of the day, I do not see the Iranian strategic calculus changing because of this pressure».
What Trump must change
To make any progress, Donald Trump will not merely need to alter that strategic calculus in Tehran.
He will first need to alter his own behavior.
Dismantling the Iranian economy would require months or even years.
It would presuppose the kind of strategic patience that Donald Trump almost never demonstrates.
Iran will not be alone in betting that the President will grow weary of his new plan long before it begins to yield results.
Donald Trump's new approach may also depend on a diplomatic turnaround.
Substantive blow
The White House is placing immense hope on military power to enforce a blockade on Iranian vessels and ports, an intent vividly captured in his misleading social media post this week declaring the Strait of Hormuz a new American territory.
Yet a genuinely effective effort to isolate Iran requires a large-scale operation spanning the Gulf, Europe, and Asia.
There are realistic avenues through which the American administration could deliver a substantive blow to the Iranian regime.
Targeting Revolutionary Guard revenues
Hudson Institute senior fellow Ludovic Hood advocates for a regional and international effort to curb the revenues of the Islamic Revolutionary Guard Corps (IRGC) and a renewed push against its regional proxy network.
In a recent op-ed in The Wall Street Journal, he called for strengthening American ties with governments in Baghdad and Beirut to challenge Tehran's power across the Middle East, while advising Treasury Secretary Scott Bessent to increase economic pressure on China, a major buyer of Iranian crude.
Hood argued that sustained economic pressure would exacerbate inflation and capital flight, triggering a banking crisis that could weaken the regime's control.
The role of allies
A blockade would prove far more effective if the US secured the participation of allies to dismantle the network of covert financial arrangements and trade corridors Tehran engineered to circumvent sanctions.
However, this brand of cooperation does not rank among the administration's strengths.
American diplomacy regarding Iran, under Donald Trump's envoys Jared Kushner and Steve Witkoff, has frequently proven naive.
The American President also alienated allies by initiating a war that threatened their national and economic interests and subsequently reprimanded them for not taking part.
This week, he threatened to bomb Oman over its stance in negotiations with Iran regarding the reopening of the straits.
Difficult choices
A total economic blockade of Iran would not be feasible without Donald Trump confronting exceptionally difficult trade-offs.
For instance, a measure carrying significant impact would involve sanctioning Chinese banks facilitating transactions tied to illicit Iranian oil sales.
However, Donald Trump is scheduled to host Chinese President Xi Jinping for an official state visit in September, one of the major centerpieces of his year.
It would come as a major surprise if he poisoned the atmosphere ahead of that meeting.
Will Trump hold the course or bluff and retreat?
Even if Donald Trump is willing to wait until economic warfare suffocates Iran, a third factor remains: Tehran possesses its own capacity to retaliate.
It understands that Donald Trump is vulnerable just over two months before the midterm elections.
And it appears determined to humiliate him to the same extent it humiliated President Jimmy Carter during the hostage crisis ahead of the 1980 election.
Iran therefore holds a strong political incentive to frustrate Donald Trump's attempts to de-escalate the conflict during the autumn campaign trail.
The Hormuz trap
Concurrently, it retains a geopolitical incentive to escalate tensions to preserve its primary strategic gain from the war: the ability to throttle shipping transiting the Strait of Hormuz.
Fresh missile or drone strikes against commercial navigation would drive up costs for American voters and remind them how deeply they oppose the war.
If the President responded, he would deepen the crisis.
If he exercised restraint, he would project weakness.
Whether framed as a shooting war or an economic one, opportunities will open for Democrats.
«I am not interested in a war of economic attrition with Iran in which the American people are the ones footing the bill on our end, at the gas pump and the grocery store», stated Democratic Representative James Walkinshaw.
Despite Donald Trump's latest social media broadside, no clear endgame is yet in sight.
And the President continues to grapple with the dilemma trapping him: Will American public tolerance for the fallout of the war run out before the regime's endurance breaks?
Who truly controls the Straits?
Iran and the United States are intensifying conflicting assertions of control over the Strait of Hormuz, yet reality remains more intricate than either side cares to admit.
Maritime navigation remains severely constrained, showing that many shipowners are unwilling to gamble on a potential Iranian strike, underscoring Tehran's ongoing leverage over the Strait of Hormuz.
Vessel transits now represent a fraction of the roughly 130 daily transits recorded prior to the war, frequently struggling to hit double digits.
Regarding crude tankers, an average of only two to three Very Large Crude Carriers (VLCC) have transited the strait daily since July 7, according to Kpler, which tracks vessels via transponders and satellite telemetry.
Prior to the war, that benchmark stood at roughly eight VLCC transits per day.
The bypass
Nevertheless, despite reduced transits, growing volumes of crude bypass the straits entirely or lean on American protection and ship-to-ship transfers to sneak oil out of the Persian Gulf.
The fact that the blockade of the Strait of Hormuz is not absolute limits the potency of Tehran's new energy weapon, while simultaneously relieving part of the upward pressure on crude benchmarks and, consequently, retail gasoline prices.
This buys US President Donald Trump additional time to prolong the current standoff, hoping that Iran will yield.
The United States is betting that economic pressure will succeed where military force has so far fallen short: compelling the Iranian regime to back down.
No sign of retreat
Yet Iran exhibits no sign of capitulation, despite compounding strain on its domestic economy and petroleum exports.
It continues striking vessels in the area, disrupting global energy logistics.
«It has now become a question of who blinks first, if anyone blinks at all», remarked Jorge Leon, head of geopolitical analysis at energy consultancy Rystad.
«There is this contradiction... the economic cost right now is heavier for Iran than for the US, but crucially, the political pressure inside Iran is far lower», he told CNN.
Iran's survival economy
Iran's economy has already absorbed a heavy blow from the conflict.
The IMF expects it to contract by more than 5% this year, marking its sharpest downturn in nearly four decades.
Inflation hovers near 80% and the rial has sank to record lows against the dollar, forcing many Iranians to purchase basic staples on credit.
Yet Donald Trump may be underestimating Iran's pain threshold.
Economic hardship is a familiar reality for the country's population, and so far, widespread anti-regime demonstrations have not materialized; rather, the regime appears emboldened by the war.
«Regarding Iran, the leadership is prepared to absorb far greater economic pain», stated Gregory Brew, senior analyst at risk consultancy Eurasia Group. Iran «has weathered years of US sanctions and now a protracted war, and it has not yielded».
80 million barrels afloat
The US is ramping up pressure by curbing Iran's oil exports through naval blockades of Iranian ports. Crude loadings onto Iranian tankers have fallen to a small fraction of levels recorded between February and April, according to Kpler.
Iran already holds roughly 80 million barrels of crude afloat outside the blockade perimeter, most of which is destined for China.
At prevailing prices, this brings in roughly $1.5 billion per month, according to Homayoun Falakshahi, lead crude analyst at Kpler.
However, the clock is ticking.
At an offloading pace of 650,000 barrels per day, Tehran possesses approximately four months of export revenues remaining, he added.
«It looks more like a slow bleed than a sudden plunge off a cliff», he told CNN.
Gasoline prices test Trump and American voters
The American economy, on the other hand, has remained relatively shielded from the war's fallout.
However, rising gasoline prices, now averaging over $4 per gallon, are hitting many Americans and testing Donald Trump's popularity ahead of the November midterms.
Even so, Donald Trump maintains his stance. «The unpopular war and higher pump prices are hurting Donald Trump, but a chaotic retreat from the Middle East would be worse», said Dan Alamariu, chief geopolitical strategist at Alpine Macro, an Oxford Economics company.
«American voters do not like presidents who lose wars», he wrote in a research note last week.
The battle for Hormuz
The Donald Trump administration has touted its capacity to escort commercial vessels through the straits, yet several analysts assess that Iran still exercises dominant leverage over the maritime corridor.
«Iran exercises near-total control over the Strait of Hormuz», enforced via «the threat of attack», stated Dimitris Maniatis, CEO of Greek maritime security firm Marisks.
Despite Tehran's leverage, up to 15 million barrels of oil exit the Gulf daily on average through both the straits and pipelines, according to US Energy Secretary Chris Wright.
This represents a substantial portion of the 20 million barrels exported daily from the region prior to the war with Iran.
Dark transits
Vessel tracking services, including Kpler, report far lower transit counts, yet analysts acknowledge voyages are growing harder to track. Many tankers conduct «dark» transits, disabling their Automatic Identification Systems (AIS) to evade detection and, in certain instances, carrying out ship-to-ship transfers outside the Strait of Hormuz to obscure movements.
Iran likely turns a blind eye to these transits, which frequently involve vessels ultimately linked to Iranian, Russian, Chinese, or Turkish interests, according to Maniatis.
«A vessel that turns off its AIS does not become invisible... That massive metal hull on the water emits extensive electronic signatures beyond the AIS transponder», he told CNN, noting that even a microwave or refrigerator in the galley emits detectable radiation.
«If the Iranians want to hit a ship, they do not rely on its AIS», he added.
Hormuz prolongs the war
Even Wright conceded that Iran, which he noted has «built a massive arsenal», is «causing disruptions across the region» and «the global economy».
He maintained, however, that its operational capability to do so is degrading.
«Our capability to escort vessels and move products out of this region is growing», he stated in an interview with Fox News last week.
Data from Kpler appears to support this view: the firm estimates that 72 of 84 crude-laden tankers (86%) that traversed the straits since July 7 likely utilized a UN-approved corridor through Omani territorial waters.
Falakshahi cautions, however, that this is not known «with certainty».
For now, crude flows via the Strait of Hormuz offer vital relief to energy markets.
Paradoxically, however, they may simultaneously contribute to extending the conflict.
«The fact that barrels of oil manage to transit the Strait of Hormuz increases the likelihood of a long war, possibly well into 2027», stated Alamariu of Alpine Macro.
«Neither side feels an urgent need to change course as long as oil prices do not spike uncontrollably and Iran earns enough to sustain the regime», the analyst added.
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