The latest round of back-and-forth military strikes by the United States and Iran, coupled with a new spike in fighting between the Saudis and Iran-backed Houthis in Yemen, highlights why a lasting resolution to this war remains a long way off.
At this point, five months after the fighting began, it’s possible to identify several important takeaways and a few likely long-term implications for Iran, the US and the broader Middle East.
Reopening the Strait of Hormuz Remains the Main Focus
Iran’s ability to control the strait and disrupt global shipping and energy supplies has clearly become the crux of the war. Iran has demonstrated that it’s unlikely to release its grip on the strait anytime soon, and it continues to attack tankers and other ships attempting to cross without Tehran’s permission. Industry experts note that shipping companies expect the strait to remain at least partially closed for several more weeks.
Meanwhile, the Houthi’s recent attacks on Saudi oil infrastructure and threats to close oil traffic in the Red Sea put considerable pressure on the world energy market.
The US lacks a viable military option to force the strait open because of the high risk of major US casualties, and because Iran’s ability to periodically attack commercial shipping with drones, missiles and mines is a major deterrent to already nervous commercial shipping firms.
Recognizing the intractable nature of this problem, Gulf states are already planning to reduce their reliance on the strait, with Saudi Arabia and the UAE likely best positioned to develop new oil shipping routes.
US Military Strikes Exact A Heavy Toll On Iran
As the war grinds on and the media focuses its attention on the global energy supply and price fluctuations, it might be easy to overlook the damage that the US campaign has inflicted on Iran. Since late February, the US (and Israel) have struck thousands of Iranian military targets; devastated Iran’s air force, navy and defense industry; killed dozens of top leaders; and killed an unknown (but undoubtedly large) number of Iranians. In recent weeks, the US campaign has shifted to striking bridges and infrastructure in the south and military sites near the Strait of Hormuz.
Iran’s economy is struggling mightily in the face of this onslaught. For example, the IMF estimates that Iran’s GDP will contract by more than 6% in 2026 with inflation expected to exceed 70%. For historical context, during the 2007-2009 financial crisis, US GDP fell by approximately 5% — America’s deepest contraction since World War II.
While Iran’s unemployment rate is difficult to accurately assess, there are reports that labor participation nationwide has been severely affected by the fighting and is down to around 40% — underscoring the fact that most of the country’s population is now working outside the official labor market.
Much of Iran’s energy infrastructure remains intact, but it too may be targeted if the war drags on, especially if Iran keeps striking Gulf energy facilities.
It’s clear that Tehran will require several years to rebuild from the damage already inflicted—obviously longer if the war continues—and will almost certainly need a combination of sanctions relief, access to frozen funds and a large infusion of international investment to help fund reconstruction. That type of international support is difficult to imagine anytime soon, although I believe China may consider participating in Iran’s reconstruction efforts once hostilities end.
Iran’s Regime Isn’t Budging
Despite the war’s enormous cost, Iran’s leaders are showing no interest in meeting US pre-conditions for a ceasefire. According to media reports, Tehran is stubbornly refusing to cede its control over commercial shipping through the strait, insisting that it be able to establish transit routes and mechanisms (think financial incentives) for passage in the waterway. And even if some accommodation is reached, I’d expect Iran to continue pressing the boundaries on this issue, constantly trying to exert more influence.
Meanwhile, the White House’s other initial war demands, including limits on Iran’s ballistic missile development, suspension of its support for proxies throughout the Middle East, and the dismantling of its nuclear program including removal of the country’ s enriched uranium stockpiles, seem no closer to resolution than when the war began.
One point to consider: Iran’s dire economic outlook and limited options for external assistance might help explain why Tehran is so determined to retain control over the strait, calculating that it will require the cash such control could provide to help rebuild its tattered economy.
Iran’s Missile Strikes Are Increasingly Effective
Even as the US air campaign pounds Iran’s conventional forces and Revolutionary Guard targets, the Iranian military shows a growing ability to effectively retaliate.
The US intelligence community believes that Iran’s ballistic missile inventory remains about 70% intact, according to The New York Times, largely owing to hardened operational sites and Iran’s ability to rapidly dig out damaged equipment after US strikes. Meanwhile, other media reports indicate that Iran’s ballistic missiles are reportedly more accurate of late, demonstrating increasingly sophisticated navigation capabilities — likely relying Chinese and Russian satellites— and using steerable warheads that can adjust their course on descent, making them harder to jam and destroy.
Iran also appears to be effectively incorporating offensive tactics learned from Russia’s fight in Ukraine, using smaller missile salvos and drones to distract US air defense systems from incoming missiles. Iran’s increasing missile accuracy is a gathering problem and an issue to watch closely as the conflict unfolds.
US Military Rethinking Basing Options
One consequence of Iran’s recent missile and drone strikes is that the US military is seriously rethinking its force posture throughout the Middle East. News media reports indicate that as many as 20 US military facilities in the Middle East, along with valuable military equipment positioned in hangars and on vulnerable runways, have sustained serious damage from Iranian missile and drone strikes. Several US service members have also been killed in these attacks in Kuwait and Jordan.
It’s likely, in my view, that the US will eventually decide to shift personnel and military hardware outside the range of Iranian weapons or reposition these assets offshore, and that there also will be a concerted effort to rebuild and harden assets that remain in existing locations and beef up air defense capabilities at these sites.
All of this will require significant funding.
Gulf States Also Exploring New Defense Options
In addition to rethinking oil shipping routes, several Gulf countries are also rethinking their security posture following Iran’s damaging missile and drone strikes. In recent months Gulf states have accelerated their purchases of interceptor missiles and UAVs, point defense systems, and precision missiles. Many of these deals have been with US defense contractors. It’s also worth noting that Gulf states are also increasingly interested in working with Ukraine to acquire counter-drone hardware and expertise. Expect this trend to intensify in the coming months.
Looking Ahead
Conventional wisdom envisions three potential scenarios for how the war will eventually play out:
- A US military escalation that will finally force Iran to make meaningful concessions, especially on its control of the strait and its nuclear program;
- A US withdrawal from the conflict and effort to turn it over to other actors to resolve, such as the European Union;
- Or a forever war (think Afghanistan and Iraq) in which the US and Iran continue hostilities at a fairly steady state at an enduringly high cost for both sides in terms of money spent and lives lost.
I can envision another scenario, which seems more likely than the other three. This is one in which the conflict is more frozen than forever, with some accommodation— likely quite fragile — reached on the strait but little meaningful progress on all other US war aims. This outcome would also be marked by lingering tensions and episodic fighting rather than continuous hostilities, and a more limited human and financial cost as the US gradually tries to withdraw its military from the region and Iran’s regime is satisfied to have both survived the war and emerged with more regional influence than it enjoyed prior to the start of the conflict.
None of these options are attractive to US policymakers but at this moment I find it difficult to discern a more realistic result.
Stay tuned and I’ll write more on the evolution of this war as events merit.
All opinions expressed in this commentary are solely those of the author.
