Trump’s deal will show how pointless his war was

June 15, 2026 — 11:59am

Oil can start flowing through the Strait of Hormuz again after the US and Iran agreed on what appears to be a 60-day ceasefire. How freely it will flow, however, is an open question.

From what has been disclosed, the strait, effectively closed since the United States attacked Iran on February 28, will gradually reopen, without tolls, while Iran begins clearing mines it has laid in the passage. In return, the US will lift its naval blockade of Iranian ports and lift the sanctions it has imposed on sales of Iranian oil.

The toll-free status of the waterway, through which 20 per cent of the world’s oil used to flow, will remain for at least the 60-day period. In that time, the countries will try to negotiate the future of Iran’s stockpile of enriched uranium, with the US holding out the carrot of further sanctions relief and the unfreezing of the tens of billions of dollars of Iranian assets held offshore.

Assuming that the US and Iran can agree on a permanent deal – which is a big “if”, given that Iran has said it wants $US24 billion ($33.9 billion) of its frozen assets released immediately, maintains it has the right to impose charges for ensuring “safe and secure passage” through the strait and insists that it won’t relinquish the right to enrich uranium for civil use – it could yet take three months for the mines to be completely removed, and for the oil tankers trapped in the strait to be cleared. It could take considerably longer still for the damage to the region’s oil infrastructure to be repaired.

And even if there is a permanent deal, it is doubtful that the postwar environment around the strait will ever return to its prewar normalcy.

The Iranians have now shown that they can close the strait at will, so there can be no return to the prewar presumption that a strait that had never been closed previously would always remain open.

Insurance rates and the cost of shipping oil from the Persian Gulf, which soared during the war, will remain higher than their prewar levels because of that risk. If Iran does impose tolls once the 60-day ceasefire ends, it would add another layer of cost to shipping oil from the gulf.

The Middle East producers whose oil was trapped by the strait’s closure have also learnt a lesson about their vulnerability. There’s already discussion about the construction of more pipelines to allow oil from the region to circumvent the strait.

Damaged industry infrastructure – oil wells that have been shut in, or their flows restricted, processing plants and refineries that have been damaged – will take months to be brought back into full production. Qatar’s Ras Laffan LNG complex, hit by Iranian drones and missiles, could take years to be fully operational. Restoring flows to wells and refineries is a delicate and risky process.

It will also take months to restore production and shipments of fertilisers and other oil derivatives.

In the meantime, the constrained supply of fertilisers – the strait handled about a third of the world’s seaborne fertiliser trade – has had a significant impact on the pricing of fertilisers, which soared, and on global food production.

The rest of the world, experiencing the worst oil shock in history, will also be changed by the war.

There has already been demand destruction, some of which will inevitably be permanent.

Sales of electric vehicles have risen sharply as the choked oil supply has hit petrol prices. Mothballed coal plants have been brought back into production, more nuclear plants are on drawing boards and the transition to renewable sources of energy has accelerated. The International Energy Agency has forecast a 420,000 barrels-a-day decline in demand for oil this year.

Sources of supply have also been diversified as countries, particularly but not exclusively, those in Asia that were completely dependent on Middle Eastern oil, have scrambled to secure oil and its derivatives from wherever it has been available.

That response to the abrupt realisation that the strait is a choke point for global energy supply is likely to be a permanent feature of the postwar energy landscape.

The oil price fell sharply after it became clear that (following almost 40 of Donald Trump’s premature declarations of a deal) there was an actual deal in place.

Whether it might fall back to sub-$US70 a barrel, at which oil was traded before the US and Israeli attacks, is unknowable at this point, but that’s probably unlikely.

The closure of the strait took more than 1.3 billion barrels of oil out of circulation. The impact of that loss of supply on prices has been muted by the unprecedented release of oil from the world’s strategic reserves (the International Energy Agency co-ordinated the agreement to release up to 400 million barrels from the reserves), by the running down of commercial stocks and by a big increase in US exports.

The available inventories of oil and oil products could have been exhausted within weeks had the war dragged on, with predictions of $US150-plus per barrel if there were no deal.

Separate to rebuilding the flows through the Strait of Hormuz, replenishing those stocks will create a floor under the price, which suggests oil prices will remain higher than they would otherwise have been through the rest of this year and perhaps beyond.

Even if there is a permanent deal, it is doubtful that the postwar environment around the strait will ever return to its prewar normalcy.

OPEC has said it will boost its production by 188,000 barrels a day, which will help put some downward pressure on prices once the strait is fully reopened, but there is likely to be a continuing supply and demand mismatch through to at least the end of the year.

The war has cost the world economic growth, increased inflation rates and hit consumers’ wallets. It may cause famines in Africa and impoverishment in some developing economies.

It’s also cost thousands of lives, along with massive destruction and damage to infrastructure in Iran and Lebanon and, as a result of its response to the attacks, lives and property in Israel and Iran’s own Middle Eastern neighbours. The US has also suffered casualties, with at least 13 of its military dead and many hundreds wounded.

To what end? Barack Obama had a deal with Iran under which it promised, with the safeguard of external scrutineers, not to enrich its uranium to weapons grade levels. It honoured that promise until Trump, in his first term, tore the Obama deal up.

Now, Trump – after launching the war and promising regime change, the seizure of Iran’s stockpile of enriched uranium, the dismantling of its capacity to produce missiles and drones and ending its ability to support its regional proxies – is trumpeting the reopening of a strait that had never previously been closed or tolled, and a continuation of the already protracted talks to roll back the enrichment of uranium that hadn’t been enriched to weapons grade levels until Trump blew up the Obama deal.

He may have to give back Iran vastly more of its own money than the $US1.7 billion Obama returned to win Iran’s agreement to a permanent deal, and in the meantime has put a massive and very expensive hole in America’s armoury of weaponry while driving up the cost of living for US households.

Iran’s response to a war that Trump thought would be over in weeks, if not days, has embarrassed and weakened America in the eyes of the rest of the world, and the nature of the agreement, if one is reached, is likely to confirm that opinion.

There’s no art that can camouflage the reality that the deal Trump is being forced to make is worse, and far more costly in dollars, lives, property and global economic damage – including to households in the US – than the one Obama struck.

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