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The US-Iran war is entering a dangerous new phase
Analysis: The end of the MoU has narrowed the space for diplomacy, leaving the US and Iran locked in a dangerous cycle of pressure, retaliation, and escalation
20.08.2026
By Giorgio Cafiero*
Source: https://www.newarab.com/analysis/us-iran-war-entering-dangerous-new-phase
Signed on 17 June, the vaguely worded Islamabad Memorandum of Understanding (MoU), frequently referred to as a “memorandum of misunderstanding”, expired on 17 August.
Although the Islamabad MoU was intended to give Washington and Tehran 60 days for talks, the two sides have failed to achieve a diplomatic breakthrough.
At this point, the US-Iran confrontation is entering a new period which will likely be shaped by continued sanctions, pressure around the Strait of Hormuz, threats, negotiations, and limited military activity.
A legitimate concern is that a minor incident involving shipping, US military forces, or Iran-backed non-state actors could trigger a return to all-out war even if neither the Trump administration nor the Islamic Republic would desire such a nightmarish scenario.
In this next phase of the US-Iran crisis, the Strait of Hormuz is set to remain at the heart of the confrontation. Preserving freedom of navigation and preventing Tehran from using the strategic waterway as a source of leverage are top priorities for Washington.
Nonetheless, Iran’s effective control of the Strait of Hormuz is central to the Islamic Republic’s strategies for pressuring the United States into making concessions to Tehran.
In an effort to force Iran into accepting the Trump administration’s conditions for ending this crisis, Washington’s strategy rests on a combination of informational, economic, and military instruments, explained Wolfgang Pusztai, a senior advisor at the Austrian Institute for European and Security Policy.
“I would like to emphasise that the sharpest sword in the US strategy is not strikes, but economic instruments such as sanctions and the naval blockade. As long as Iran does not attack commercial ships and other targets in the region, there is no urgent need for the US to strike Iran,” he told The New Arab.
Trump appears intent on waiting until the sanctions and blockade take effect. However, as we have seen, the US will almost certainly resume strikes if Iran renews attacks on shipping in the Strait or on Gulf Cooperation Council (GCC) members, noted Pusztai.
If the US has reliable intelligence on the location of Iran’s remaining ballistic missiles and transporter erector launchers, a targeted one- to two-week campaign could significantly reduce the threat to GCC states and US bases in the region, he added.
“What we will likely see is a continuation of the sanctions and of the naval blockade with limited strikes in response to eventual larger military provocations by Iran. For Trump, a continued low-level war outside of the US media spotlight is certainly better than a humiliating defeat, especially before the midterm elections,” the Austrian defence and security analyst explained to The New Arab.
“On the other hand, Iran might try to draw the US again into a larger, more costly military confrontation to further undermine American domestic acceptance of the war further on,” he added.
Since the Islamabad MoU began unravelling, there has been a pattern of limited military exchanges, escalating threats, coercive diplomacy, and increased pressure on shipping in the Strait of Hormuz, noted Dr Neil Quilliam, an associate fellow in the Middle East and North Africa programme at the London-based think tank Chatham House. He expects continuation of this pattern following the MoU’s expiration.
Yet, Dr Quilliam stressed that both the US and Iran maintain strong incentives to prevent this crisis from becoming a prolonged conflict.
“The Trump administration remains under pressure to demonstrate that its military campaign achieved tangible results, while Iran is seeking to preserve regime stability and avoid further damage to its economy and infrastructure,” he told The New Arab.
Nonetheless, given that the two sides are operating without any agreed framework since 17 August, there is a real risk that any “serious incident in the Gulf, an attack on US assets, or a confrontation involving shipping could rapidly trigger a renewed cycle of military action,” as Dr Quilliam noted, assessing that “full-scale operations therefore cannot be ruled out, but they are more likely to result from escalation and misjudgement than from a deliberate decision by either side to return to war”.
There is good reason to expect a continuation of the same cycle that has been repeated this year amid the US-Iran confrontation since April, entailing escalating threats, negotiations, and overly optimistic claims from Trump or his coterie that an agreement to reopen the Strait of Hormuz is imminent, explained Gordon Gray, the former US ambassador to Tunisia.
“The cycle repeats like clockwork once the promised agreement fails to materialise,” observed the former American diplomat.
“The senior-most ranks of the US military have already advised Trump that…the United States has reached the point of diminishing returns in terms of the effectiveness of strikes against Iran and…the United States is rapidly depleting its stocks of military materiel,” Gray told The New Arab.
“This reality, coming on top of the deep and growing unpopularity of the war, suggests that Trump would ultimately refrain from full-scale military operations against Iran.”
Iran's 'wait out Trump' strategy
The leadership in Tehran sees time on Iran’s side. This assumes that mounting economic pressure, rising fuel prices, and opposition to the war ahead of the US midterm elections will eventually force Washington to make concessions in exchange for reopening the Strait of Hormuz.
This might prove to be a winning strategy for Iran. But Tehran is undeniably accepting serious risks and perhaps overestimating the importance of the US’s electoral calendar.
Dr Quilliam believes that Iran is “misguided” in taking for granted that the resolve in Washington will fade before Iran loses its ability to weather the economic and military costs of this confrontation.
“The longer the dispute over the Strait of Hormuz continues, the greater the strain on Iran's economy and the higher the risk of further military action against Iranian assets,” he told The New Arab.
“Tehran may calculate that time is on its side, but delaying meaningful engagement could allow the US to tighten pressure, build broader international support, and justify additional measures. In that sense, Iran is not pursuing a low-risk waiting game. It is gambling that it can withstand a prolonged confrontation better than its adversary.”
Gray’s view is that Tehran is failing to recognise differences between Trump’s political calculations today and those of President Jimmy Carter in 1980.
Whereas Carter was seeking re-election throughout most of the 1979-81 hostage crisis, Trump is not running for another term. “[Trump] apparently believes, and may well be correct, that the Republican Party will maintain control of the Senate. In short, he is not as concerned about the midterm elections as the Iranian leadership thinks or hopes,” said Gray.
The scale of Iran’s economic problems and the widespread suffering across the country is enormous, and how long the Islamic Republic can last under such dire conditions is an open question.
Given these extreme dynamics inside Iran, Dr Nader Hashemi, director of Georgetown University's Prince Alwaleed bin Talal Center for Muslim-Christian Understanding, believes that Iran’s strategy is perhaps a case of Tehran overplaying its hand.
“By not pursuing negotiations and saying it’s going to wait out the Trump administration before it considers diplomacy with the United States, that effectively means that Iran will not get meaningful sanctions relief or economic relief for the next two and a half years. The Iranian economy and the plight of the average citizen in Iran is catastrophic,” he told The New Arab.
“The level of pain, suffering, unemployment, rising inflation, and inability of people to meet their basic life needs - and I’m talking about purchasing food - has risen to new catastrophic levels, and this has been exacerbated by the American blockade on Iran,” added Dr Hashemi.
An expanding conflict
There is a real danger that the US-Iran crisis will extend beyond the current confrontation between Washington and Tehran, with the expiration of the Islamabad MoU making containment of this conflict increasingly challenging.
The risk of more regional states being increasingly pulled into this crisis, either directly or indirectly, is real.
Particularly alarming is the military threat that Trump issued against Oman at the time of the Islamabad MoU’s expiration. As a longstanding intermediary between the United States and Iran, Muscat has played an important role in keeping diplomatic channels open.
Even if the US taking military action against the country is an extremely unlikely scenario, Trump’s threats to do so nonetheless risk damaging Washington’s relationship with Muscat at a time in which a strong US-Oman partnership is key to de-escalation.
“President Trump’s threat of attacking Oman is a continuation of his diplomacy by threats,” said Dr Shireen Hunter, an honorary fellow at the Center for Muslim-Christian Understanding at Georgetown University who served as an Iranian diplomat before 1979, in an interview with The New Arab.
“With increasing opposition to the war with Iran in Congress, extending the war to Oman would be very unwise. Moreover, such an attack would further undermine US standing with Persian Gulf Arab states. In addition, attacking Oman would not change Tehran's mind regarding an agreement with the US,” she added.
This threat against Oman speaks to Trump’s “deeply authoritarian governing style” in which he believes he can “coerce other countries to follow his policies,” Dr Hashemi told The New Arab.
He also explained that “it makes no practical sense that the United States would start bombing its own allies in the Middle East and the fact that Donald Trump is actually making these types of threats highlights the total incoherence of US foreign policy”.
As Gray sees it, Trump’s second threat to bomb Oman was “bizarre” and reflective of the president’s “frustration and impetuosity as well as the fact that he has no idea whatsoever how to extricate the United States from the war he started with Iran”.
Yemen is another flashpoint that can’t be ignored when considering the potential expansion of the US-Iran crisis now that the Islamabad MoU has expired.
Given the Houthis’ ability to threaten commercial shipping and maritime infrastructure in the Red Sea and Gulf of Aden, it is necessary to consider how an uptick in Ansar Allah’s attacks could force Washington to respond militarily, potentially creating a second major front at a time when Washington is already attempting to manage the confrontation around the Strait of Hormuz.
The result could be a widening cycle in which Iranian pressure through regional partners generates additional US military action, which in turn prompts further retaliation.
“Developments in the Red Sea and Gulf of Aden may prove just as important as events in the Strait of Hormuz in shaping the next phase of the crisis,” Dr Quilliam told The New Arab.
A far more extreme possibility is the prospect of the conflict entering an entirely new and far more dangerous phase, as noted by Dr Hunter, who pointed to reports that the United States may be considering the use of tactical nuclear weapons against Iran, while stressing that this possibility remains contingent on whether those claims are accurate.
Even without such an escalation, the combination of Iran-backed non-state actors, attacks on shipping, US military responses and threats against regional states creates significant potential for miscalculation.
Therefore, a central concern is not simply whether Washington or Tehran deliberately chooses a wider war, but whether a series of escalating actions and reactions gradually leads to such an outcome.
In that sense, the Islamabad MoU’s expiration matters not only because it removes a diplomatic framework, but because it may leave fewer mechanisms for preventing a localised crisis from further regionalising and internationalising.
Can diplomacy prevent escalation?
In this confrontation, neither Washington nor Tehran appears willing to make the first significant concession. Although under mounting economic and military pressure, Iran’s leadership lacks any incentive to accept an agreement that could be seen by a domestic audience as surrender to the United States and Israel.
Meanwhile, Washington has climbed a tall tree that would be humiliating for it to climb down given how much the Trump administration has invested in trying to demonstrate that military and economic pressure can force Tehran to change course.
However, Washington is not in a position to ignore the costs of a prolonged conflict, including declining domestic support, military constraints, and the risk of a wider regional war.
Consequently, the US and Iran find themselves in a dangerous stalemate in which both sides seem to calculate that maintaining pressure will result in the other eventually blinking despite the fact that neither Washington nor Tehran can be entirely certain about how much pressure the other side can actually withstand.
Within this context, diplomacy is the most important and most underused instrument in the crisis. As Pusztai explained, Washington’s strategy has relied heavily on economic and military pressure while devoting insufficient attention to building political coalitions and creating diplomatic pathways out of the conflict.
The challenge now is to find a way for the US and Iran to step back in manners that allow both sides to save face. The most serious danger may therefore be less a deliberate decision by Washington or Tehran to launch a wider war than a series of miscalculations that gradually makes escalation unavoidable.
The Islamabad MoU’s expiration has narrowed the space for managing those risks, making the search for credible diplomatic off-ramps all the more urgent.
*Giorgio Cafiero is the CEO of Gulf State Analytics
Follow him on X: @GiorgioCafiero
Edited by Charlie Hoyle
Analysis: The end of the MoU has narrowed the space for diplomacy, leaving the US and Iran locked in a dangerous cycle of pressure, retaliation, and escalation
20.08.2026
By Giorgio Cafiero*
Source: https://www.newarab.com/analysis/us-
Signed on 17 June, the vaguely worded Islamabad Memorandum of Understanding (MoU), frequently referred to as a “memorandum of misunderstanding”, expired on 17 August.
Although the Islamabad MoU was intended to give Washington and Tehran 60 days for talks, the two sides have failed to achieve a diplomatic breakthrough.
At this point, the US-
A legitimate concern is that a minor incident involving shipping, US military forces, or Iran-
In this next phase of the US-
Nonetheless, Iran’s effective control of the Strait of Hormuz is central to the Islamic Republic’s strategies for pressuring the United States into making concessions to Tehran.
In an effort to force Iran into accepting the Trump administration’s conditions for ending this crisis, Washington’s strategy rests on a combination of informational, economic, and military instruments, explained Wolfgang Pusztai, a senior advisor at the Austrian Institute for European and Security Policy.
“I would like to emphasise that the sharpest sword in the US strategy is not strikes, but economic instruments such as sanctions and the naval blockade. As long as Iran does not attack commercial ships and other targets in the region, there is no urgent need for the US to strike Iran,” he told The New Arab.
Trump appears intent on waiting until the sanctions and blockade take effect. However, as we have seen, the US will almost certainly resume strikes if Iran renews attacks on shipping in the Strait or on Gulf Cooperation Council (GCC) members, noted Pusztai.
If the US has reliable intelligence on the location of Iran’s remaining ballistic missiles and transporter erector launchers, a targeted one-
“What we will likely see is a continuation of the sanctions and of the naval blockade with limited strikes in response to eventual larger military provocations by Iran. For Trump, a continued low-
“On the other hand, Iran might try to draw the US again into a larger, more costly military confrontation to further undermine American domestic acceptance of the war further on,” he added.
Since the Islamabad MoU began unravelling, there has been a pattern of limited military exchanges, escalating threats, coercive diplomacy, and increased pressure on shipping in the Strait of Hormuz, noted Dr Neil Quilliam, an associate fellow in the Middle East and North Africa programme at the London-
Yet, Dr Quilliam stressed that both the US and Iran maintain strong incentives to prevent this crisis from becoming a prolonged conflict.
“The Trump administration remains under pressure to demonstrate that its military campaign achieved tangible results, while Iran is seeking to preserve regime stability and avoid further damage to its economy and infrastructure,” he told The New Arab.
Nonetheless, given that the two sides are operating without any agreed framework since 17 August, there is a real risk that any “serious incident in the Gulf, an attack on US assets, or a confrontation involving shipping could rapidly trigger a renewed cycle of military action,” as Dr Quilliam noted, assessing that “full-
There is good reason to expect a continuation of the same cycle that has been repeated this year amid the US-
“The cycle repeats like clockwork once the promised agreement fails to materialise,” observed the former American diplomat.
“The senior-
“This reality, coming on top of the deep and growing unpopularity of the war, suggests that Trump would ultimately refrain from full-
Iran's 'wait out Trump' strategy
The leadership in Tehran sees time on Iran’s side. This assumes that mounting economic pressure, rising fuel prices, and opposition to the war ahead of the US midterm elections will eventually force Washington to make concessions in exchange for reopening the Strait of Hormuz.
This might prove to be a winning strategy for Iran. But Tehran is undeniably accepting serious risks and perhaps overestimating the importance of the US’s electoral calendar.
Dr Quilliam believes that Iran is “misguided” in taking for granted that the resolve in Washington will fade before Iran loses its ability to weather the economic and military costs of this confrontation.
“The longer the dispute over the Strait of Hormuz continues, the greater the strain on Iran's economy and the higher the risk of further military action against Iranian assets,” he told The New Arab.
“Tehran may calculate that time is on its side, but delaying meaningful engagement could allow the US to tighten pressure, build broader international support, and justify additional measures. In that sense, Iran is not pursuing a low-
Gray’s view is that Tehran is failing to recognise differences between Trump’s political calculations today and those of President Jimmy Carter in 1980.
Whereas Carter was seeking re-
The scale of Iran’s economic problems and the widespread suffering across the country is enormous, and how long the Islamic Republic can last under such dire conditions is an open question.
Given these extreme dynamics inside Iran, Dr Nader Hashemi, director of Georgetown University's Prince Alwaleed bin Talal Center for Muslim-
“By not pursuing negotiations and saying it’s going to wait out the Trump administration before it considers diplomacy with the United States, that effectively means that Iran will not get meaningful sanctions relief or economic relief for the next two and a half years. The Iranian economy and the plight of the average citizen in Iran is catastrophic,” he told The New Arab.
“The level of pain, suffering, unemployment, rising inflation, and inability of people to meet their basic life needs -
An expanding conflict
There is a real danger that the US-
The risk of more regional states being increasingly pulled into this crisis, either directly or indirectly, is real.
Particularly alarming is the military threat that Trump issued against Oman at the time of the Islamabad MoU’s expiration. As a longstanding intermediary between the United States and Iran, Muscat has played an important role in keeping diplomatic channels open.
Even if the US taking military action against the country is an extremely unlikely scenario, Trump’s threats to do so nonetheless risk damaging Washington’s relationship with Muscat at a time in which a strong US-
“President Trump’s threat of attacking Oman is a continuation of his diplomacy by threats,” said Dr Shireen Hunter, an honorary fellow at the Center for Muslim-
“With increasing opposition to the war with Iran in Congress, extending the war to Oman would be very unwise. Moreover, such an attack would further undermine US standing with Persian Gulf Arab states. In addition, attacking Oman would not change Tehran's mind regarding an agreement with the US,” she added.
This threat against Oman speaks to Trump’s “deeply authoritarian governing style” in which he believes he can “coerce other countries to follow his policies,” Dr Hashemi told The New Arab.
He also explained that “it makes no practical sense that the United States would start bombing its own allies in the Middle East and the fact that Donald Trump is actually making these types of threats highlights the total incoherence of US foreign policy”.
As Gray sees it, Trump’s second threat to bomb Oman was “bizarre” and reflective of the president’s “frustration and impetuosity as well as the fact that he has no idea whatsoever how to extricate the United States from the war he started with Iran”.
Yemen is another flashpoint that can’t be ignored when considering the potential expansion of the US-
Given the Houthis’ ability to threaten commercial shipping and maritime infrastructure in the Red Sea and Gulf of Aden, it is necessary to consider how an uptick in Ansar Allah’s attacks could force Washington to respond militarily, potentially creating a second major front at a time when Washington is already attempting to manage the confrontation around the Strait of Hormuz.
The result could be a widening cycle in which Iranian pressure through regional partners generates additional US military action, which in turn prompts further retaliation.
“Developments in the Red Sea and Gulf of Aden may prove just as important as events in the Strait of Hormuz in shaping the next phase of the crisis,” Dr Quilliam told The New Arab.
A far more extreme possibility is the prospect of the conflict entering an entirely new and far more dangerous phase, as noted by Dr Hunter, who pointed to reports that the United States may be considering the use of tactical nuclear weapons against Iran, while stressing that this possibility remains contingent on whether those claims are accurate.
Even without such an escalation, the combination of Iran-
Therefore, a central concern is not simply whether Washington or Tehran deliberately chooses a wider war, but whether a series of escalating actions and reactions gradually leads to such an outcome.
In that sense, the Islamabad MoU’s expiration matters not only because it removes a diplomatic framework, but because it may leave fewer mechanisms for preventing a localised crisis from further regionalising and internationalising.
Can diplomacy prevent escalation?
In this confrontation, neither Washington nor Tehran appears willing to make the first significant concession. Although under mounting economic and military pressure, Iran’s leadership lacks any incentive to accept an agreement that could be seen by a domestic audience as surrender to the United States and Israel.
Meanwhile, Washington has climbed a tall tree that would be humiliating for it to climb down given how much the Trump administration has invested in trying to demonstrate that military and economic pressure can force Tehran to change course.
However, Washington is not in a position to ignore the costs of a prolonged conflict, including declining domestic support, military constraints, and the risk of a wider regional war.
Consequently, the US and Iran find themselves in a dangerous stalemate in which both sides seem to calculate that maintaining pressure will result in the other eventually blinking despite the fact that neither Washington nor Tehran can be entirely certain about how much pressure the other side can actually withstand.
Within this context, diplomacy is the most important and most underused instrument in the crisis. As Pusztai explained, Washington’s strategy has relied heavily on economic and military pressure while devoting insufficient attention to building political coalitions and creating diplomatic pathways out of the conflict.
The challenge now is to find a way for the US and Iran to step back in manners that allow both sides to save face. The most serious danger may therefore be less a deliberate decision by Washington or Tehran to launch a wider war than a series of miscalculations that gradually makes escalation unavoidable.
The Islamabad MoU’s expiration has narrowed the space for managing those risks, making the search for credible diplomatic off-
*Giorgio Cafiero is the CEO of Gulf State Analytics
Follow him on X: @GiorgioCafiero
Edited by Charlie Hoyle