Four weeks into a war that was going to take four days, and that has so far cost the US about $30-40bn and Israel $300m a day, Washington is further away from a diplomatic agreement with Iran than it was in May 2025.

Not only has the war failed to persuade Iran to agree to dismantle its nuclear programme in the comprehensive and irreversible way the US demanded in a 15-point paper that it tabled on 23 May last year, Washington is now having to negotiate to reopen the strait of Hormuz, a strategic waterway that has been open ever since the invention of the dhow, with a short exception of a tanker war in the 1980s between Iran and Iraq.

This regression is proving to be perplexing for the American high command. Pete Hegseth, the secretary of defence, recently said that “the only thing prohibiting transit in the strait right now is Iran shooting at shipping”, but this was not quite right. Iran has not been shooting at shipping that much in recent weeks. Instead, it is the fear of Iran shooting at shipping that is scaring off insurers and tanker owners.

Still worse from the US perspective, Iran has set up a waterside stall whereby prime ministers and tanker owners can bargain with the Iranian navy over the toll they are willing to pay for their tankers to be given “free passage”. Iran plans to turn the strait into a money spinner, just as Egypt charges for access to the Suez canal. By some calculations, given the massive scale of the traffic that passes through the strait each year, Iran could raise $80bn a year. If a law currently being rushed through the Iranian parliament passes, tankers carrying oil from favoured non-hostile nations such as India, Japan, Pakistan, South Korea and China will be waved through or offered cheaper rates.

Little wonder Trump is thrashing around. The US along with Israel continues to bomb Iran, but he has now twice put back the date of threatened strikes on Iran’s civilian power stations – an action that would constitute a war crime. He continues to insist Iran has been defeated and yet Iran continues to behave as if it is not.

That is partly because this struggle is not just being fought in command posts, but on the trading floor. The price of oil is the key metric for Iran’s success, along with its remaining supply of missile launchers. As a result, 95% of traffic through the strait of Hormuz remains blocked, depriving the markets of 10-13m barrels of oil each day. Such is Iran’s stranglehold even Trump describes Iran allowing ships through as a “present” to the US.

Trump admits he is surprised the price of oil is not higher. Jason Bordoff, the founding director at the Center on Global Energy Policy, agrees. “At some point, the physical reality of the loss of that much oil per day has to catch up with the paper markets, the trading expectations,” he says. “There is no policy intervention that can cope with a disruption that large.”

For Iran, oil trading anything above $100 a barrel is pitched high enough to destroy demand and disrupt the world economy. But it is not just oil. The strait provides passage for chemicals, helium, metals and fertilisers. As during the Covid pandemic, the world is discovering something new about the inter-connectedness of supply chains and how geography has blessed Iran with a unique chance to break these chains.

Mary I supposedly said: “When I am dead and opened, you shall find ‘Calais’ lying in my heart” – a reference to the painful English loss of Calais to the French in January 1558. For Trump, the word may be Hormuz, the waterway where his presidency ran aground. For it is hard to find a serious commentator, of any nationality or expertise, who thinks the advantage in this war currently lies with the US.

Sir Alex Younger, the former head of MI6, told the Economist that – much as it pained him – it was Iran, his old adversary, that had the upper hand. “The reality is the US underestimated the task and I think, as about two weeks ago, lost the initiative to Iran. In practice, the Iranian regime has been more resilient than anyone would have expected. They took some good decisions as early as last June about dispersing their weapons and delegating authority for using those weapons which has given them extra resilience. Through the strait they have globalised not internationalised the conflict. They have played a weak hand pretty well.”

Mairav Zonszein, a senior analyst on Israel at the International Crisis Group, says: “It is becoming painfully clear that not only the United States and Israel are losing this war, but that this is one of the biggest strategic failures of the west, with the most significant consequences for regional geopolitics and the global economy since world war two.” He said the US was nowhere near meeting its original strategic goals and had only created new problems.

Domestic politics in the US is also becoming ominous. Curt Mills, the executive director of the American Conservative, says: “Trump’s legacy is at stake in Iran: if the war drags on, that will be all that will be remembered of his second term. George W Bush also did not want to be a war president: he had goals regarding education, immigration and social welfare. None of this was accomplished; his record was crushed by the war in Iraq.” Americans, including Republicans, want this war to end, adding to the pressure on Trump to prove that sending 10,000 troops to the Middle East would not be the definition of a strategic quagmire.

Inside the Iran regime, where survival was the objective, there is a growing sense that the balance is tilting in their favour, so much so that Iran may indeed overplay the weak hand to which Younger referred. The Iranian media, for instance, is repeatedly picking up stories from western thinkers and retired generals claiming Trump’s strategy has failed.

The speaker of the parliament, and supposedly Trump’s preferred leader, Mohammad Bagher Ghalibaf, is clear: US soldiers will only find they cannot fix what their generals have broken. Without naming the United Arab Emirates, he said he was aware a country was planning to join a US effort reopen the strait by force and that country would find nothing would be spared.

Not surprisingly, at his more than hour-long pre-cabinet press conference on Thursday morning, Trump denied that the US was ensnared. He reiterated that the military campaign was well ahead of schedule. The Iranians know they have a disaster on their hands, he said, adding that “they were begging to negotiate, not me”. He said: “If they don’t negotiate, we are their worst nightmare. I am the opposite of being desperate.”

Steve Witkoff, Trump’s special envoy to the Middle East, reiterated the US’s key demands laid out in his updated 15-point plan: no domestic uranium enrichment, no stockpiles, removal of enriched uranium from Iran, restrictions on missile capability and reopening the strait of Hormuz. Witkoff claimed there were strong signs that the Iranians knew after their 27-day pummelling that they were at an inflection point.

But he took no account of the counterdemands now tabled by Iran on the strait of Hormuz, a problem that has only arisen owing to the US decision to attack Iran, or on sanctions relief.

Philip Gordon, a former foreign policy adviser to Kamala Harris when she was US vice-president, thinks “there is no chance Iran will agree to Trump’s demands and the longer the US holds out for them, the more costs and pain everyone will endure. In the short term at least, limits on Iran’s nuclear programme, ballistic missiles, support for proxies and threat to the strait are all more likely to be ensured through deterrence and prevention than with a comprehensive, formal agreement, and the sooner we recognise that, the better off we will be.”

The former head of the Iran desk at Israel’s military intelligence, Danny Citrinowicz, also predicted that by the expiry of Trump’s latest 10-day deadline, Iran would not surrender, would not accept the 15-point framework, would not relinquish control of Hormuz and would continue attacks on Israel and the Gulf states. After that, Trump will face a decisive choice: a further escalation of tensions, a retreat or a push for a negotiated settlement similar to the one Iran offered in March. The UN is not going to sanction the use of force to reopen the strait, Europe will not participate and the G7 will not endorse it.

One diplomat recently involved in the peace talks says he fears that if Trump cannot see a way out, he will resort to a nuclear weapon.

Emile Hokayem, from the International Institute for Strategic Studies, senses that “Trump wants to avoid a long, protracted war of attrition so the Pentagon is giving him high risk, high investment options with potential high impact, as if one big blow will change the trajectory of the war, or at least the perception of it – ie that Iran retains strategic leverage by having identified and developed control over the centre of gravity of the war, Hormuz.

“This reminds me of when US and Israeli analysts and officials were arguing that Rafah in May 2024 was going to be the big, final blow in the Gaza war. How did that work?”