This story was first featured in the Aftermath newsletter, a series from David Dayen exploring the economic consequences of the war in Iran. To have these stories delivered to your in-box as soon as they are published, sign up for the newsletter here.

Welcome to Aftermath, our periodic series on the consequences of the war in Iran. Both combatants in this war are insisting that it has ended. But the series is called Aftermath, and that means it goes on as long as the effects remain, which as you’ll read in this edition should be a while. So if you aren’t getting Aftermath in your email, there’s still time to rectify this. You can sign up at prospect.org/aftermath.

Are We Still at War?

First off: It’s good that bombs are no longer falling on Tehran and across the Gulf. The Iranian economy is a total shambles, and ordinary Iranian people, not the country’s leadership, are bearing the resulting suffering. War is horrible and debilitating and a colossal waste of resources. If a highly produced fiction is what’s needed for peace to break out, give me the fiction.

So here’s the fiction: As hinted at for weeks, the agreement is nothing more than a deal to make a deal. That makes it highly unstable and dependent on a swarm of details, many yet to come. But the inescapable conclusion is that President Trump is suing for peace after making a disastrous decision to go to war.

Nobody’s seen the text, and that’s a tell, because judging from all available information, the U.S. gets nothing from this except paying money, some $300 billion, to return to the prewar status quo, and maybe not even that. Iran held out, proved it can control the Strait of Hormuz in the teeth of a combined attack from both the U.S. and Israel, and got virtually everything it wanted.

A humiliating setback like this could go a long way toward preventing the imperialists from trying to do something like this again.

The cease-fire extends for 60 days while negotiations begin on Iran’s nuclear program; Iran enters those negotiations knowing its adversary is reluctant to resume the war, especially as the midterms near. Iran “reaffirmed” it will not build a nuclear weapon, a mere restatement of the nonproliferation treaty it ratified in 1970. Iran can sell oil on global markets, and will get unfrozen assets and reconstruction funds, though likely through a third party and trickled out after implementation.

There will be no tolls on the strait, but only for the duration of the agreement, and now we’re hearing that afterward there won’t be tolls but there will be fees in exchange for unspecified “services provided.” There can’t really be any services except for allowing ships to pass, which is … a toll. This is legalistic hairsplitting worthy of a Comcast contract, and it shows that Iran maintains operational control of the strait, which it did not have before. Even if Iran makes concessions, they will have to be enforced, and future shipping guaranteed, at the barrel of U.S. guns, tying America to the Middle East forever.

Trump bombed Iran to get a friendlier regime, stop its support for proxies, and end its nuclear and ballistic missile programs. None of that happened, and Iran got giant new revenue streams, an end to strangling sanctions, and a chance to rebuild its economy in the deal.

And you know what? Good. A humiliating setback like this could go a long way toward preventing the imperialists from trying to do something like this again. There is a difference between leading the world and dominating the world that neoconservatives will never understand. That the hawks feel the need to leak dissatisfaction in their own government’s deal shows their impotence. I believe in the power of deterrents, and getting smoked by Iran in a war may provide one.

The Prospect in your inbox

Subscribe for analysis that goes beyond the noise.

And if this drives a wedge further between the U.S. and a frankly apocalyptic cult in Israel, all the better. The Israelis are doing everything they can to undermine the agreement by continuing to bomb Lebanon. Trump has criticized Benjamin Netanyahu rhetorically but has yet to tie Lebanon hostilities to denying arms or aid. The world, including the Jewish community, should hope for a breaking point, because Israel’s actions have been morally abominable and strategically catastrophic. Israel demanded this war and ends it in a worse position. Maybe we’ll learn not to follow blind men into a corner.

The Beginning of the End, or the End of the Beginning

Iran has already said it will not reopen the Strait of Hormuz until the agreement is formally signed on Friday, and the U.S. blockade is on until then as well. The 500 ships still stranded in the Gulf will probably wait longer than that; mines have yet to be cleared, little activity has been reported thus far, and the world’s biggest tanker operator cautioned that until the deal was “material” it made more sense to stay out of the strait. What ships would make a long journey into the strait during this 60-day negotiation period, only to risk getting stranded or coming up empty?

The most revealing passage I’ve seen about this is from an oil analyst who said that Brent crude oil futures would fall to $80 per barrel by year-end as long as the strait remains open. Brent crude futures are at $80 today. The decline in oil futures markets was all predicated on getting to an agreement. Once the agreement is reached, everything’s priced in and oil has nowhere further to fall. That’s bad news for a U.S. consumer paying $4.04 on average for a gallon of gas.

Gulf countries have found overland routes to get their oil to market, and China reduced consumption by over three million barrels a day, an enormous feat (though we’ll see if it endures). Non-OPEC countries have also boosted output. So the strait doesn’t have to come all the way back to return global oil markets to something approaching normal in the long run.

The world needs a massive oversupply to reach normalcy in the summer months. Inventories are so low right now; there are 21 million barrels left at the storage facility in Cushing, Oklahoma, and you cannot go much further below that or you start hitting sludge at the bottom of the tanks. There’s barely any potential boost from global strategic petroleum reserves, which are at historic lows. This suggests that prices will go up, not down, over the next few months as holiday travelers compete with nations looking to rebuild their reserves for a still-limited oil supply. Any Iranian “fees,” as well as increased shipping insurance premiums, get added onto the cost.

Aftermath

This story first appeared in The American Prospect’s free Aftermath newsletter, a series on the economic consequences of the war in Iran.

There’s also the fact that some of the supply shock came not from an inability to transit the strait, but from real damage to Gulf facilities in Kuwait, Iraq’s southern fields, and Qatar, particularly that country’s liquefied natural gas facilities, which could take years to repair.

What I was told at the beginning of the war is that every week of the strait’s closure would mean a month of fixing on the back end. We had 15 weeks, putting us into next fall before things get untangled. That’s if nothing goes wrong in the interim. And since Iran proved it can close the strait, volatility will spike anytime it makes a credible threat.

Some are calling this the “Hormuz hangover.” I think it’s a signal that, as Nathan Tankus wrote, the primary crises of the 21st century are supply bottlenecks. This is the third major shock in the last six years (COVID and the Ukraine war being the others), climate shocks are ever-present, and geopolitics isn’t getting any easier. Resiliency is needed now more than ever. The Trump administration chasing off electric vehicles and waging war on renewables is just about the dumbest strategy imaginable, building an island around the United States at a moment of energy transition that holds us in the past. In 50 years, if the U.S. looks like a version of Cuba, limping along with old technology as the world surpasses, this was the moment when it began.

Thanks for reading. If you have tips or ideas for future stories, let us know! You can email us at aftermath@prospect.org.

Before you go.

I hope that you found this article interesting and thought-provoking. The reason we’re able to publish stories like this — free of programmatic ads and never behind a paywall — is because readers like you step up to support our work. 

The Prospect doesn't answer to advertisers or billionaire owners. We answer to you and to our commitment to pursuing the truth, wherever that leads us. 

Independent, reader-supported journalism is critical at a time when the free press is under assault. 

If you believe this kind of reporting should exist and remain free to read, we hope you'll consider chipping in. Every contribution, however modest, makes a real difference.

David Dayen
Executive Editor