Iran war enters endgame as costly stalemate takes hold

Iran war enters endgame as costly stalemate deepens

Six months after US and Israeli forces launched attacks on Iran, killing its supreme leader and seriously injuring his son and designated successor, Tehran’s government is facing mounting economic pressure but remains firmly in power. Iranian leaders appear convinced that time is working in their favour.

US President Donald Trump has threatened to impose tougher sanctions on Iran, but Washington faces a major obstacle: Tehran is betting that Trump will stop short of aggressively enforcing secondary sanctions against countries that continue to support its economy, particularly China and India.

Measures announced by Washington on Monday signal a new stage in the conflict, which began on February 28. The focus has shifted from missile strikes and air raids to Iran’s oil revenues, financial institutions and international trading partners.

US Treasury Secretary Scott Bessent has vowed to sever the financial channels keeping Iran’s economy functioning, while a US-led naval blockade is restricting Tehran’s oil exports and access to foreign currency.

Former US diplomat and Carnegie Endowment senior fellow Aaron David Miller described the administration’s strategy as an increasingly desperate attempt to find a way out of the conflict.

Bessent compared the latest sanctions to the 1944 D-Day landings in France during World War II. Miller, however, offered a different assessment, saying the measures looked less like D-Day and more like an effort born of desperation, with Washington still no closer to resolving the conflict.

Blockade and sanctions

Michael Knights, head of research at New York-based strategic advisory firm Horizon Engage, said the naval blockade could ultimately have a greater impact than the sanctions themselves. Iran’s immediate challenge, he argued, is no longer simply surviving economic pressure but finding a way to overcome it.

Tehran has spent decades adapting to sanctions and has previously endured US “maximum pressure” campaigns without fundamentally changing its policies. Increasing economic pressure could instead encourage Iran to raise the costs for its adversaries, particularly by pressuring Gulf states such as Saudi Arabia to push Washington towards negotiations.

Knights said Iran could increasingly adopt tactics similar to those used by its Houthi allies in the Red Sea — combining periodic attacks, intermittent negotiations and sustained disruption while stopping short of full-scale war.

Potential targets could include commercial shipping, ports, energy infrastructure and other strategic assets, raising the economic and security costs for Gulf states and increasing pressure on them to seek an end to the confrontation.

Washington rejects that assessment and maintains that the strategic balance remains firmly in its favour.

“The Iranian economy is in free fall and the regime’s military has been decimated,” US State Department spokesperson Tommy Pigott said. He added that Trump “holds all the cards” and that Washington was cutting off every remaining financial lifeline available to Tehran.

Iranian officials dismiss US strategy

Alan Eyre, a former US diplomat who worked extensively on Iran, questioned whether Washington has sufficient international backing and administrative capacity to enforce the sanctions effectively.

Unlike the multilateral pressure campaign that preceded the 2015 nuclear agreement — when Tehran negotiated with major powers to limit its nuclear programme in return for sanctions relief — the latest US strategy relies heavily on public threats rather than sustained coordination with allies and trading partners.

Iranian officials argue that Washington is repeating a strategy that has already failed. A senior Iranian official told Reuters that countries such as China were unlikely to abandon economic ties with Tehran simply to advance US interests.

Some analysts believe the problem runs even deeper. From North Korea to Russia and Iran, sanctions have rarely compelled governments to abandon objectives they consider essential to their survival.

The Iranian official said Tehran believes Washington’s broader strategy is aimed at worsening domestic economic conditions in the hope of triggering political unrest. But he argued that Trump’s “maximum pressure” campaign failed during his first term and would fail again.

“If the pressure increases, Iran’s approach will change too,” he said, adding that Gulf Arab states understood that further pressure on Tehran could expose them to greater retaliation.

Growing risk of unrest

For Iran’s leadership, the greatest danger may not be economic hardship itself but the possibility that worsening conditions could trigger another wave of mass protests, according to Iranian officials and insiders.

Annual inflation reached 66% in July, while consumer prices were 87.9% higher than a year earlier, according to Iran’s Statistical Centre. Food prices rose by 128% over the same period.

President Masoud Pezeshkian acknowledged the scale of the economic crisis last week, saying that the country’s problems had multiplied several times while government income had declined.

Economic grievances have repeatedly fuelled nationwide protests in recent years. Demonstrations over worsening living costs in January were violently suppressed by the Revolutionary Guards and Basij militia, with thousands reportedly killed.

The appointment this month of Hossein Taeb, a key figure in previous crackdowns, to head the Basij was described by a former reformist official as one of the strongest indications yet that Iran’s leadership is preparing for possible renewed unrest.

The Basij, a paramilitary organisation linked to the Revolutionary Guards, has repeatedly been deployed by Iran’s clerical leadership to suppress domestic protests.

This highlights a central dilemma for Washington: sanctions could inflict further economic damage without compelling Iran’s rulers to change course. Historically, Tehran has responded to domestic unrest with repression and to external pressure with retaliation abroad.

A dangerous impasse

The situation is particularly difficult for Gulf states.

While they favour economic and diplomatic pressure over another war, they also fear an outcome in which Iran claims victory while retaining the ability to disrupt shipping through the Strait of Hormuz — a crucial global oil route that Tehran has effectively blocked, contributing to higher oil prices worldwide.

Abdulaziz Sager, chairman of the Saudi-based Gulf Research Center, said Gulf governments remain sceptical that sanctions alone can quickly change Iran’s behaviour, given the resilience of its leadership and its ability to maintain domestic control.

Major political change or the collapse of Iran’s theocratic leadership, he said, is unlikely to happen quickly.

That leaves the region facing a potentially dangerous stalemate if diplomatic efforts fail to deliver a breakthrough.

Washington wants Tehran to give up its leverage over the Strait of Hormuz without granting Iran a role in controlling the waterway. Iran wants the US naval blockade lifted without being seen as surrendering. Gulf states, meanwhile, want the conflict contained without allowing Tehran to emerge as the victor.

The result is an increasingly costly deadlock, with neither side appearing willing or able to make the concessions needed to bring the conflict to an end.