On the 18th of last month (local time), the United States and Iran—which had brought an armistice memorandum of understanding (MOU) into effect and were conducting follow-up negotiations—began clashing once again over the Strait of Hormuz. Tensions between the two countries, which had quieted around the funeral of former Iranian Supreme Leader Ayatollah Ali Khamenei, the North and Central American World Cup, and the 250th anniversary of the founding of the United States (Independence Day), appear to be intensifying again. Diplomatic circles interpret the moves as both nations staging shows of force immediately after major domestic events passed, once working-level negotiations fell into a stalemate. The analysis is that each country is employing a strategy to gain the upper hand in negotiations through demonstrations of control over the Strait of Hormuz and pressure via military and economic power. Meanwhile, international oil prices—which had stabilized for a time—have surged again on concerns of supply shortages, triggering a chain reaction across bond yields, stock prices, and the value of the dollar.
Iranian military attacks three vessels including one from mediator Qatar in the Strait of Hormuz... display of naval supremacy amid stalled follow-up negotiations
On the 7th, Reuters reported that a liquefied natural gas (LNG) carrier struck by a missile attack from Iran's Islamic Revolutionary Guard Corps (IRGC) in the Strait of Hormuz on the night of the 6th could explode due to fire. This marks the first time since the war broke out that an LNG carrier from Qatar—a mediator in the armistice negotiations between the U.S. and Iran—has been attacked. The struck vessel, the Al Rekayat, is owned by Nakilat, a company held by Qatar's state-run QatarEnergy. The UK Maritime Trade Operations (UKMTO) of the British Navy also stated that a tanker and an LNG carrier passing through the Strait of Hormuz at a point 15 km east of Lima, Oman, caught fire after being struck by unidentified projectiles.
On the 7th, the U.S. online outlet Axios also reported that the Iranian military fired at least two missiles at a merchant vessel passing through the strait that day. According to U.S. sources, both vessels sustained significant damage but there were no casualties.
On the same day, in Omani territorial waters, a liquefied petroleum gas (LPG) carrier believed to be the Liberia-flagged Al Marya received an order from the Iranian military to change its course toward the Iranian coast as it attempted to pass through the strait. This vessel is managed by the Abu Dhabi National Oil Company (ADNOC). Earlier, the Khatam al-Anbiya Central Headquarters, which oversees the integrated command of the Iranian military, warned on the 2nd, "All tankers and merchant vessels passing through the Strait of Hormuz must use the routes designated by Iran," adding, "Those that deviate from the designated routes or ignore navigation regulations will immediately face a strong response."
Qatar pointed to Iran as being behind the vessel attacks and immediately protested. On the 7th, Qatar's Ministry of Foreign Affairs summoned Iran's deputy ambassador to the country and delivered a letter of protest. Qatari Foreign Ministry spokesperson Majed al-Ansari said, "This incident is an unacceptable attack on the security of international navigation and global energy supply, and a clear violation of international law," and urged Iran to "immediately cease actions that threaten regional security and maritime navigation." In response, according to Iran's state-run IRNA news agency, Iranian Foreign Ministry spokesperson Esmail Baghaei said, after Qatar named Iran as being behind the vessel attacks, "It is bewildering and contrary to the principle of good neighborliness," and demanded, "Regional shipping companies must refrain from actions that violate the MOU."
The U.S. also mounted a strong response. On the same day, the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) announced it would revoke the 60-day temporary general license issued on the 21st of last month permitting the production, delivery, and sale of Iranian crude oil. OFAC explained that transactions in Iranian crude oil would be phased out and permitted only until the 17th.
U.S. reactivates crude oil sanctions and launches heavy airstrikes... uncertainty over armistice agreement grows again
The U.S. response also expanded militarily. On the 7th, the U.S. Central Command posted on X (formerly Twitter), "We have launched a series of powerful airstrikes in response to attacks targeting merchant vessels carrying innocent civilians in international waters." It added, "We will make them pay an enormous price," and pointed out that "Iran's attacks are not only dangerous but a clear violation of the ceasefire."
Indeed, according to Iran's state-run IRIB broadcaster, six explosions were heard on Qeshm Island that day and seven in Sirik. Multiple explosions were also detected in the port city of Bandar Abbas. Reuters, citing Iranian media, reported that six projectiles landed in the area of the Taheruei pier in Sirik.
According to AFP, the Iranian Foreign Ministry countered, "We sternly warn of the consequences of the U.S. violation of the terms," and "We will take firm measures to protect our national interests and national security." Regarding the U.S. withdrawal of the sanctions waiver on Iranian crude oil sales, it also protested, "It is a measure that violates the MOU, and the U.S. must bear responsibility for the consequences," and "We will take all measures we deem necessary to defend the nation's interests and security."
Earlier, on the 26th and 27th of last month, the U.S. and Iran also engaged in two days of armed exchanges in the Strait of Hormuz over Iran's attack on a tanker. Following Iran's tanker attack, the U.S. carried out airstrikes on Iranian military facilities, and Iran attacked U.S. military bases in neighboring Gulf countries such as Kuwait and Bahrain. Having brought the armistice MOU into effect on the 18th of the same month and agreed to avoid armed conflict, they violated it in less than ten days. The two countries then managed to keep negotiations going with difficulty, continuing indirect talks through mediators in Doha, Qatar, early this month.
According to Reuters, as tensions in the Strait of Hormuz rose again, Saudi Arabia has begun reviewing plans to expand alternative transport routes that can send crude oil to the western Red Sea coast without passing through the strait. It is discussing with some neighboring countries such as Kuwait and Qatar a plan to expand the capacity of the East-West pipeline—which transports crude oil from eastern oil fields to the port of Yanbu on the western Red Sea coast—by 2 million barrels, from a maximum of 7 million barrels per day to 9 million barrels. This is because even after the U.S.-Iran MOU agreement, shipping volumes through the Strait of Hormuz have not recovered to pre-war levels. The Strait of Hormuz is a route through which about 20% of the world's crude oil volume originally passed.
Clashes come as major events pass—250th anniversary of founding, Khamenei's funeral, World Cup... Trump says "the U.S. should take Greenland"
The timing of this clash between the U.S. and Iran is drawing more attention as it dovetails precisely with the situations in both countries. The two nations engaged in fierce nerve wars and foreshadowed a clash during the U.S. 250th anniversary events on the 4th and the funeral of former Iranian Supreme Leader Khamenei from the 4th to the 9th. President Donald Trump, on the 6th during Khamenei's funeral period, applied pressure at the White House in Washington, D.C., saying, "We will either make a deal or finish the job," adding, "Finishing the job isn't that hard." He went on to emphasize, "We can bring down their bridges within an hour and cut off their energy supply," and "They now have no money at all because we aren't giving it to them." Iran, too, waited more than four months to hold the funeral of former Supreme Leader Khamenei, who died in a U.S. and Israeli airstrike on February 28, heightening anti-American sentiment on a national scale.
Coincidentally, the timing of the clash also came right after the U.S. was eliminated from the North and Central American World Cup, which began on the 11th of last month. While there is no direct causal relationship with the Strait of Hormuz conflict, this suggests that a calculation to divert the American public's domestic attention outward may have at least partly influenced the timing of both countries' provocations. The U.S. was eliminated on the 6th after a 4-1 rout by Belgium in the round of 16. In this process, President Trump sparked controversy by personally requesting a review from FIFA President Gianni Infantino regarding the suspension of player Folarin Balogun, who had received a red card in the round of 32 match between the U.S. and Bosnia and Herzegovina on the 2nd. Indeed, after Trump's phone call, FIFA on the 5th reversed the one-game suspension imposed on Balogun and notified the U.S. Soccer Federation that its enforcement would be suspended for one year. This means that the U.S. World Cup performance was that important to Trump for boosting his political approval ratings. Iran's national soccer team was eliminated earlier in the group stage on the 27th of last month.
It is also noteworthy that the U.S. airstrikes came almost simultaneously with Trump's attendance at the North Atlantic Treaty Organization (NATO) summit. Ahead of the NATO summit held in Ankara on the 7th, Trump held a bilateral meeting with Turkish President Recep Tayyip Erdogan. Just before that, Trump met with reporters and said Europe had not helped the U.S. in the Iran war [BODY]
Citing again the point about NATO, he blasted the alliance, saying he was "very disappointed in NATO." He also traced the source of the U.S. rift with NATO to Greenland, asserting once more that "Greenland is a place that should be controlled by the United States, not Denmark."
Stocks, bonds and gold fall while oil and the dollar rise… Localized clashes likely to continue until a final agreement
The news of the U.S. revoking sanctions waivers on Iranian crude and launching airstrikes against Iran naturally hit global financial markets as well. On the 7th, on the ICE Futures exchange in London, Brent crude futures for September delivery closed at $74.16 per barrel, up 3.01% from the previous session. On the New York Mercantile Exchange, U.S. West Texas Intermediate (WTI) futures for August delivery also jumped 2.76% to close at $70.44 per barrel. Both Brent and WTI marked their largest gains since the 1st of last month.
As rising oil prices reignited inflation concerns, stocks and bond prices fell in tandem. That day, the three major New York stock indexes all declined: the Dow Jones Industrial Average (-0.25%), the Standard & Poor's 500 (-0.45%), and the Nasdaq Composite (-1.16%). The direct cause of the drop was a plunge in semiconductor-related stocks following Samsung Electronics' (005930) second-quarter earnings announcement the previous day, but heightened uncertainty over the Middle East situation also contributed significantly to weakening investor sentiment. The yield on the 10-year U.S. Treasury note, the benchmark for the global bond market, surged 0.07 percentage points to 4.54%. It once again broke through the psychological resistance line of 4.5%. When bond yields rise, prices fall accordingly.
As bond yields rose, the spot price of gold — a safe-haven asset that pays no interest — fell 1.4% to $4,108.70 per troy ounce. Conversely, as U.S. bond yields rose, the dollar strengthened again. The dollar index (DXY), which reflects the value of the dollar against six major currencies, stood at 101.078, up 0.22% from the previous session.
According to a survey released that day by the Federal Reserve Bank of New York, U.S. consumers raised their one-year inflation expectations to 3.7% as of June. This was up 0.2 percentage points from May and the highest level since September 2023 (3.7%). Three-year inflation expectations also rose 0.2 percentage points from May to 3.3%. This too was the highest since June 2022 (3.6%).
John Williams, president of the New York Fed, acknowledged in a Fox Business interview the same day that "inflation is still too high." Still, he said, "Since energy prices are expected to decline going forward, I view the short-term inflation outlook positively." Williams is regarded as the de facto number two at the Federal Reserve, given that the New York Fed president is the only permanent voting member among the regional Fed chiefs.
Regarding the elimination of "forward guidance," which previews the path of monetary policy, from the statement of the Federal Open Market Committee (FOMC) meeting on the 16th–17th of last month — the first presided over by Chair Kevin Warsh — Williams said there was strong consensus among the members. "It was no longer appropriate to provide explicit forward guidance on where rates are headed in terms of inflation and the economic outlook," Williams explained. "There is too much uncertainty."
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Given that about 20 days have passed out of the 60-day follow-up negotiation period, localized clashes between the U.S. and Iran are expected to continue for some time. That is because control of the strait is, in effect, Iran's only card for pressuring the U.S., while for the U.S. it is a sensitive variable that must be removed from the negotiating table. The biggest question is whether the two countries can produce a meaningful final agreement over the remaining 40 days. It is observed that none of the core agenda items — dismantling Iran's nuclear program, removing highly enriched uranium, and fully reopening the Strait of Hormuz without tolls — will easily find common ground.
