In the news
On 30 August, Reuters reported that Washington attacked two Iranian launchers on Iran's Larak Island, claiming that the IRGC forces “were observed preparing to launch rockets with sea mines into Strait of Hormuz.” The attacks marked the first major military escalation since late July, with a reported casualty of three civilians. Iran decried the accusations and the IRGC retaliated with ballistic missile strikes on the King Hussein and Al Azraq US bases in Jordan.
On 01 September, Iran’s semi-official news outlet Tasnim reported that President Masoud Pezeshkian affirmed that “If the US returns to that same memorandum of understanding, we will abide by it as well,” in conversation with Russia’s President Vladimir Putin on the sidelines of the SCO summit.
On 02 September, according to media reports, the US had launched a barrage of strikes against Iran, targeting strategic assets including air defense sites, radar systems, mine-laying capabilities, and communications sites. Iran responded with attacks on US facilities in Jordan, Bahrain and Iraq. On the same day, Reuters also reported that for the first time, Iran has gone about seven weeks without shipping significant crude exports through the Strait of Hormuz after the US reinstated the naval blockade.
Issues at large
1. The return to hostilities
Following an intense 13-day strike campaign in late June, the US and Iran there was a lull. During this period the situation remained tense but relatively quiet, even without a formal ceasefire. There were no major direct exchanges of strikes, though the broader conflict continued through economic pressure, disrupted shipping in the Strait of Hormuz, and sanctions. However, the latest wave of attacks marks an end to the respite, plunging the region into renewed escalation.
2. Intensifying US economic pressure and military escalation
Washington has intensified its efforts to coerce Tehran to a favourable settlement through a series of sanctions, compounded by military escalation against Tehran’s interference in the Strait of Hormuz. The US has shifted from limited, precise actions to larger, more powerful waves of airstrikes targeting IRGC’s strategic infrastructure near the Strait, with President Trump explicitly warning that any Iranian retaliation would trigger harder strikes. Concurrently, the administration launched “Operation Economic Outcast,” a coordinated Treasury-led campaign aimed at systematically isolating Iran’s already war-battered economy through tightened sanctions, further restrictions on oil exports, and broader financial measures designed to choke off remaining revenue streams.
3. Dwindling crude exports and a weakened Iranian economy
The Iranian economy was plunged into the war fresh off an economic crisis and a major civil unrest in its wake. Iran’s economy is under severe strain from the cumulative effects of the six-month war, the intermittent naval blockade of its ports and the Strait of Hormuz, and intensified Western sanctions, resulting in soaring prices, and widespread hardship for the civilian population, the major contributors to the unrest of 2025. President Masoud Pezeshkian had earlier stated that Iranian exports have fallen by 35 per cent due to US sanctions. The intensifying US blockade over the strait has also choked Tehran’s primary lifeline of crude oil exports, pushing the country into further economic strain. Islamabad has further choked remaining export channels and foreign-exchange reserves.
4. Recurring cycles of violence and the limits of diplomacy
The six months of intense conflict have been marked by recurring cycles of escalation, interspersed with brief pauses and diplomatic efforts. However, none of the formal diplomatic initiatives have succeeded in establishing meaningful grounds for resolution or a lasting halt to hostilities. Negotiations have failed to produce any meaningful outcome. Although Iran has continued to hint at compliance with the MoU, particularly amid intensifying US pressure, reciprocity from Washington has remained absent. The US appears steadfast on its path of attrition, unwilling to negotiate over unrestricted access to the Strait of Hormuz. Tehran, meanwhile, has remained unyielding in its hardline position and increasingly assertive demands over the strait despite the willingness to negotiate, further diminishing the scope for meaningful negotiations.
In perspective
Despite navigating the international economic system for decades while weighed down by Western sanctions, Tehran is also feeling the pressure of US economic measures, particularly the blow to its crude exports caused by the Hormuz blockade. However, Tehran continues to maintain its position while reiterating its willingness to negotiate, a stance it has consistently maintained throughout the war, even as the US resorted to annihilative rhetoric and chest-thumping. However, the latest round of attacks indicates that Washington is set on a clear path of escalation. The oscillation between escalation and negotiations underscore the limitations of diplomacy, as both Iran and the US continue to pursue zero-sum outcomes in their favour. The scope for a negotiated settlement remains out of reach in the foreseeable future, while the further escalation remains imminent.
