Iran War: US-Iran Differences Over “Deal”; Israel Still Bombing Lebanon, Expected to Try Other Spoiler Stunts; Oil Cliff Closer Than Most Think as Best Case Strait of Hormuz Reopening Sluggish

[Today’s Iran war post yet again fired before finished. Please return at 8:00 AM EDT or refresh your browser then for the complete version]

Many commentators, particularly on YouTube, have been debating what is in and not in the yet-to-be published Memorandum of Understanding between Iran and the US, which is set to be signed on Friday, particularly since what some key players on each side are are saying does not converge.¹ It may be, as some have suggested, that the text has still not been finalized and the two sides are still wrangling.

Many are pointing out that that what the US and Iran are saying wildly different things about what has been agreed. Given that Trump once said that Putin had agreed to go to a summit in Budapest when no such thing had or did happen, and that Hegseth continues to loudly maintain that the US is in full control of the Strait of Hormuz, and hundreds of US-approved but no Iranian vessels have gotten through, one could assume that a lot of wha the American side is saying is simply made up.

But see a fresh example of the sort of thing that confirms US slipperiness: the 14 points published by Mehr News included $300 billion for Iran reconstruction,

From Aljazeera’s live feed in the past hour:

Trump says US not investing any money in Iran
Continuing his remarks, Trump said the US would not be “investing any money in Iran”, calling such claims a “ridiculous” rumour.

We said in comments yesterday that the US will never pay $300 billion, ever. Trump can’t get the appropriation.

And the Iranians surely know that. Yet Vance has confirmed that a fund idea is in play, per The Hill in Vance: Iran ‘could have access to’ $300B reconstruction fund:

Vice President Vance on Monday said Iran could have access to a $300 billion reconstruction fund under its peace agreement with the U.S. if Tehran upholds its obligations outlined in the deal.

When asked about the fund by CBS News’s Ed O’Keefe during a Monday morning interview, Vance said, “Well, Ed, that’s the sort of thing they could have access to, funded by the Gulf Coast Coalition, so long as they honor their end of the obligation.”

The Gulf States are not parties to this agreement and have their own rebuilding to do, so the scheme sounds like quite a stretch, the son of various Ukraine reconstruction funds that never got off the ground.

We speculated yesterday in comments that the $300 billion is an Iran placeholder for damages. When Trump can’t deliver, then Iran’s counter is to say they will impose Strait of Hormuz fees until they have collected that much after their expenses.

Amusingly, the same article in The Hill reported:

Sen. Lindsey Graham (R-S.C.) shared concerns about the deal, noting that “Iran’s view of the agreement seems different than what the American negotiating team is claiming.”

But it is important to keep front and center how little this agreement amounts to. It reminds me of Japan, where in the 1980s, contracts were an alien idea. I had to protect clients from themselves when buying companies in the US, since they did not understand that only the contract mattered. In Japan, which has extremely well-understood business and social norms, what in the Anglosphere would be commemorated in legal agreements would instead be done on an informal basis that amounted to an understanding to keep wrangling as the arrangement moved forward.

In comments yesterday, former diplomat Aurelien (who has objected repeatedly to calling the US and Iran dealings “negotiations”) described what this MOU amounts to:

I’ve made the point before that a written document of some kind, and the way the situation works out on the ground, are two different things. There is no “deal” here, and it’s highly improbable that there ever will be an agreed legally binding document between the two countries. All this MoU does is to provide a list of largely unilateral political undertakings, out of which the US comes badly, but which can be waved around to persuade the credulous that something has been gained from the fighting.

The existence of such an MoU doesn’t and cannot change the realities on the ground. Iran has won militarily, and has the economic upper hand. Any further assault by the US and Israel on Iran would be less successful than the previous one, and the retaliation would be a lot more severe. The Iranians can close the Straits, directly or just by making threatening noises, any time they like. To that extent, even if the US ripped up the document next week and decided to attack Iran again, it wouldn’t make any difference. The game is effectively over, and there is nothing the US, Israel or the West in general can do to change that, no matter how fiercely they beat their chests.

Trump’s panicked response to Iran threatening to strike Israel again after Israel again bombed Beirut was a huge tell to Iran, that Trump on some level recognized how deep his hole is and at least realizes he needs to stop digging. As we have said and will unpack sooner, the driver is almost certainly his recognition of the still-in-play oil cliff. We’ll unpack soon why on current trajectories. end of July-early August looks like when it would kick in.

And keep in mind that getting a “deal” done does not keep the US from suffering an oil-cliff energy spike but seems too likely merely to delay when it arrives (we’ll provide more detail later in the post).

The world will not get back to an old normal level of Strait of Hormuz transits soon. Energy expert Kpler recently put as its best case scenario that the Strait of Hormuz would be at 45% of its former traffic levels in one year. To illustrate one of many impediments: US is insisting on demiming.² Even if Iran actually laid hardly any or even none, raising that specter delays when most vessel owners (ex perhaps those with ships still bottled up in the Gulf) will risk passage. Insurers will also act as enforcers.

So what a deal means is that energy shipments though the Strait of Hormuz will remain at a depressed but hopefully improving level for a very long time. That means that the energy deficit that has been met so far with inventories will continue, particularly since the deal hopium drop in energy prices will keep consumption at a higher level that it would be if diesel and gas prices were properly risk adjusted.

Ergo, oil inventory draws will continue but a slower pace. If Kpler’s forecasts are right, the US and other countries still face the energy cliff. And it may arrive before the midterms.

It has become imperative for Trump to get Strait of Hormuz volumes as high as possible as soon as possible. That gives Iran the whip hand if chooses to use it. In negotiations, who comes out best is not as much the function of who has the strongest position, but which side has the most will and skill. Historical examples abound, such as the so-called father of diplomacy, Talleyrand, succeeding in having France keep its pre-war borders after the Napoleonic wars.³

During the fake ceasefire, Iran would close the Strait of Hormuz quickly when the US behaved badly. If it keeps this level of disciplining up, what the text says is close to irrelevant.

One interview is far from dispositive, but Professor Marandi’s talk with CGTN suggests that Iran will be hard-nosed:

From Marandi via a lightly cleaned-up machine transcript:

But there’s a lot of skepticism of naturally about Trump and how erratic his behavior is and how unpredictable he is. He could wake up tomorrow and say something to wreck the deal.

And then of course there’s Netanyahu who is doing whatever he can to prevent the deal from being implemented. And if he does continue with the genocide in Lebanon and the slaughter of women and children as he’s been doing for for for many many weeks now, the Iranians will not implement their side of the bargain, meaning allowing ships linked to Saudi Arabia, Kuwait, Emirates, Hat, and Bahrain, which were all involved in the war against Iran. It’ll refrain from allowing them to use the Strait of Hormuz foremost. So, Trump should be very careful to make sure that Netanyahu does abide by the ceasefire and exits Lebanon and ends the slaughter.

Foreign Minister Abbas Araghchi has made fresh statements consistent with Marandi’s understanding:

Iranian Foreign Minister Abbas Araghchi:

The end of the war will not be complete without the withdrawal of Israeli forces from the territories they occupied in Lebanon.

Any military attack by Israel on Lebanon and the continued occupation of Lebanese territories from now on, in… pic.twitter.com/4fu3wEy4Yi

— Open Source Intel (@Osint613) June 16, 2026

Similarly:

BIG: @amwajmedia has gotten hold of what informed political sources in Tehran describe as Para 1 of the Iran-US MoU.

For the first time, it EXPLICITLY commits Iran and the US PLUS "their allies in the current war" to immediately and permanently end military ops in Lebanon. This… pic.twitter.com/ALFZrrYDXn

— Mohammad Ali Shabani (@mashabani) June 16, 2026

Mind you, Israel has kept up its attacks but its deadline has not yet arrived. We pointed out in our post yesterday that Iran made the US ending its blockade and ceasing hostilities on all fronts as of Monday night a condition for signing on Friday. Iran ships have been allowed to go past the US blockade line, so that part so far is in place. As of yesterday, Israel was still attacking in Lebanon, see a post by Sam Husseini, Despite Iran Deal, Israel Continues Attacking Lebanon and Gaza and Reuters in Israeli strike kills one in south Lebanon, first deadly attack since U.S.-Iran deal announcement for confirmation.

Note that even though Iran made noises that and end to Israeli genocide in Gaza and ethnic cleansing were key demands, Iran did not include them in its “deal” demands, Jeremy Scahill explained on Breaking Points that UN involvement on both issues made it difficult for Iran to intervene on its own.

Alastair Crooke on Judge Napolitano provided a good explainer yesterday, focusing on Israel’s position:

Crooke stressed that the easy part in trying to end conflicts is agreeing to the de-escalation. The hard part is keeping the two sides from pulling it apart.

Crooke also described how Netanyahu’s polling has plunged, from 64% odds of winning in March to 32% now. He needs to keep the war in Lebanon going and cannot be seen as acquiescing to Trump. Israelis believe Hezbollah needs to be defeated and that Israel must have no restriction on its freedom of action.

That of course is a delusion given the extent of Israeli dependence on the US. We pointed out that the US could cut off intel, but that is a blunt instrument. Larry Johnson has explained on fresh YouTubes that Israel does not have KC 15 refueling jets. It has an older version and not in large numbers. Israel would also be denied the use of Prince Saud airbase. The result is that if the US simply denies Israel the use of US refuelers, it would be extremely limited in its ability to attack Iran. So the US could clip Israel’s wings, literally.

And the US appears to be signaling that that is just what it might do:

Pentagon prepares 'limited' withdrawal of refueling jets from Israel's Ben Gurion Airport: Reporthttps://t.co/R4RqPlJ3Rv

— The Cradle (@TheCradleMedia) June 16, 2026

To continue with the widespread concern with Israel’s keen interest in blowing up the deal, a new article from the Wall Street Journal surprisingly says Israel’s power in the Beltway has declined. But enough to make a difference here? From Israel Is Alarmed by Trump’s Deal With Iran

President Trump’s deal to wind down the war with Iran set off alarm bells in Israel, where top officials are wrestling with the consequences of easing the pressure on Tehran and the risks of opening a rift with the U.S. over the war with Hezbollah in Lebanon..

Iranian Foreign Minister Abbas Araghchi said the U.S. was on the hook to end Israel’s attacks and aggression in Lebanon, state media reported.

Defying those claims, Israeli Defense Minister Israel Katz said the military would hold its so-called security zone in Lebanon indefinitely, saying it was needed to protect communities in northern Israel. He also said Israel would act independently to stop Iran from getting nuclear weapons if necessary…..

It is a harsh comedown from Israeli hopes that the war would bring fundamental change to the region by toppling or crippling the Iranian regime and paving the way to diplomatic relations with more of Israel’s Arab regional counterparts under an American security umbrella, said Michael Oren, a former Israeli ambassador to Washington.

“If Iran receives sanctions relief of billions of dollars in assets, it will rebuild its military capabilities and proxies, and the blow to U.S. prestige in the region will be immense if not irreversible,” Oren said…..

Oren said Israel now has its back against the wall and can’t make concessions in the fight against Hezbollah even if it risks its relationship with Trump.

“It’s not a question of what Israel can do, but what it must do,” he said. “There’s almost no wiggle room there.”

While Israel would have lobbied Congress in the past to influence the White House, Israel no longer holds that kind of sway among lawmakers or the American public, said Oren.

And Israel is still defying Trump:

In the past few minutes there’s been sustained artillery bombardment targeting outskirts of Nabatieh city – southern #Lebanon – for people here the war didn’t end .. Israel they believe wants to occupy more areas

— Zeina Khodr (@ZeinakhodrAljaz) June 16, 2026

So will Iran clear its throat and say no signing if the US does not drop a hammer on Israel?

Now to the oil cliff. Robert Pape provided key information I must confess I had not seen elsewhere, and I have been trying to pay attention. You know that great US Strategic Petroleum Reserve, which had over 400 million barrels in it before Trump started to draw it down to contain US energy prices? The operating minimum is 270 to 300 million barrels! What kind of industry pork exercise was this, to stockpile oil in such a way that ginormous quantities were not usable?!?!

From Pape in a lightly-edited machine transcript:

I’m tracking the leverage according to the oil inventories, Scott, that’s the underlying reality that is giving Iran the leverage. And there’s two sources that I have relied on for this. Number one in the nearest term source, oil inventory experts that I’ve have known about but I had a chance to actually physically meet face to face in person for over four hours here at the University of Chicago in a meeting. They flew in from around the world. It wasn’t actually initially to meet with me it’s you know we have this pretty important economics department at the University of Chicago..

I got the invitation and and and of course the Iran war was the centerpiece, you can imagine, right?..

And so I learned a tremendous amount. And so in the short term, what’s happening is I [got a] more solid understanding of exactly where the bottoms are in the oil inventories. Now this is available online. You can find stuff, but it’s different when you’re actually face to face and you can really interrogate.

So the bottom line is that uh the the floors on our strategic reserves and this is true of other countries as well is the floor is higher and harder than is typically communicated.

So we started the war with just under the US strategic reserve uh under about 400 million barrels of oil in February 28th. Uh we’re now at 348 and we’re drawing down eight a week.

That’s the million barrels a week we’re drawing down. The floor though is not zero and it’s not 150. It’s somewhere between 270 and 300….

Now, what happens when you get to that level, Scott, is these caverns where we keep the oil, and this is because this is just how oil is kept, are salt….what happens is the cave walls, the walls start to collapse.

And that is the physical operational when they say the operational minimums, that’s what they’re talking about. Now there is a little bit of wiggle room. So it’s this debate between 270 and 300 [million barrels]…

We’ve already had some supply uh I’m sorry, demand destruction.
It’s not very much, but it’s enough to create a real tight balance between supply and demand.

So, as new oil uh comes on the market over the next couple months, and it’s going to take a couple months for new oil to come on the market here uh for as as a lot of people will already know, pumps open, ships getting filled, ships transiting over the water.

So ships going to refinery will take will take somewhere between 30 and 60 days to even start happening. But during that time you’ll have to still draw down the inventory. So that inventory draws will still keep going down because we won’t have the new oil coming in for 30 to 60 days.

Now even then we won’t have enough oil to fill up the inventory or the cushion. So that means that that knife edge will be there for uh months probably about four to six months something like that uh even if everything goes perfectly no firing no shooting nothing and in that period of time that’s when even the smallest of disruptions by Iran uh here or a hurricane or any disruption so it’s not even just Iran any of those things will have a disordinate and a disproportionate effect in affecting the prices of oil, the price of gasoline, what we pay in our cars.

A new article in Politico states that the SPR level is actually 326 million barrels.

Pape points out that for the first 30 to 60 days of normalization, most of the new supply will re-fill the pipeline, as in tankers will have to go to the Gulf empty, get filled up, and then putter to their destinations. So there will not be much new supply. That means more inventory drawdowns.

Worse, the optimism about the “deal” looking on will tend to keep energy prices down and encourage consumption. So the 8 million a barrel gap in the US is likely to continue.

326 million barrels – a 300 million barrels minimum operating level is 3+ weeks of supply or, generously, 25 days. If the US can manage to go as low as 270 million barrels, that translates into at most 4 more weeks or at best a bit over 50 days.

So it looks as if even if everything goes right from the US perspective, odds favor the US hitting the oil cliff before the talks are over. And it’s not as if the new supply coming in would fill the gap between demand and supply, so the US looks set to hit it, albeit a bit later (a few weeks?). If energy was coming in on a somewhat diminished basis, the shock would not be as severe because the shortfall would not be as large, but it looks as if an energy price increase is baked in.

And that is before getting to how these conditions work to Iran’s advantage. Any new closure of the Strait of Hormuz, even if brief, increases the supply crunch.

Yesterday, we cited a Lloyd’s List article that explained why insurers and ship operators are very cautious about a reopening of the Strait. Most will need to be reasonably satisfied before they send vessels back to the Gulf. That is why (among other reasons) that Kpler expects it to take a very long time for traffic levels to increase, and to remain well below old normal levels until well into 2027.

Those concerns are going mainstream. From Politico in Trump is urging tankers to sail through Hormuz. Vessels aren’t so sure yet (hat tip Kevin W):

Trump’s declaration of a peace agreement with Iran on Sunday provided some breathing room for the administration as oil and gasoline prices fell. But analysts said conflicting reports — including from Vice President JD Vance — on whether Iran still will be able to charge oil tankers to travel through the Strait of Hormuz and whether the Strait was in fact open to any traffic has kept oil shipping companies wary of resuming traffic through the key waterway…

On Monday, senior administration officials speaking on background told reporters that 25 ships a day are now passing and that they expected to get to 50 ships a day “pretty quickly.”

Hormuz will be open toll-free for 60 days, and the expectation is that a full reopening will be part of a final agreement, the officials said. Reopening will only be possible once all of the mines are cleared, they added…

For now, the Joint Maritime Information Center, a service the U.S. Navy runs to issue security updates and risk assessments for commercial shipping, said Monday that the U.S. blockade of Iranian ports will remain in place until the ceasefire agreement is formally implemented on June 19. The advisory instructed seafarers and shipping companies not to attempt transits without authorization and maintained the maritime threat level in the Strait of Hormuz at “SEVERE.”…

Vessel traffic getting back to normal will take time, according to market intelligence firm Sparta Commodities, which said that “full Hormuz flows” within a week or two is optimistic. In a commentary Monday, Sparta said that even if politics stays on track this week ahead of the MOU signing, vessels that are still trapped on the wrong side of the strait “may find it slow going to exit.”

Another major consideration is the sweeping for mines, which takes time. Before the deal emerged this weekend, the International Energy Agency predicted “a minimum of two to three months” after mine clearing for steady exports to begin through the narrow passageway…

Maersk, a leading global shipping company, called the agreement a “welcome and positive development,” but said it has not altered its operations in the Persian Gulf…

The conflicting statements from the two sides will likely slow the progress of reopening the strait, which keeps upward pressure on oil and gasoline prices. Oil companies have warned that dwindling inventories of gasoline and crude oil could push prices higher even if the strait reopens.

Statements from the United States and Iran are “unclear” and don’t give enough specific information about factors like timing and safe routes, said Jakob Larsen, chief safety and security officer at BIMCO, a trade association for shipowners, operators and more….

INTERTANKO, the association representing independent tanker owners worldwide, told POLITICO that shipowners are hopeful but remain cautious as they assess the security situation and seek more information on potential mines in the region, how and when they will be cleared, and when it will be safe to resume transits through the Strait of Hormuz

So this is a long-winded way of saying that the energy leverage that Iran has is now about to come fast and hard into play if the Trump Administration does not play very very nicely. Aside from needing to surmount considerable internal opposition from Zionists and hawks, is the largely incompetent Trump Administration able to perform?

Done for today! See you tomorrow!

_____

¹ I do not take at all seriously Trump claims, made at the G-7 so he could look like a Big Man, that the text was already signed electronically by both sides. The landing page of Tasnim News hours after the Trump assertion:

² We pointed out earlier that the US has pretty much no ability to demine (the US has only littoral ships which are ill-suited to that role) and relies on Japan for that sort of capability. My impression is that it would take a couple of weeks for ships to arrive from East Asia. Will the US rely on Iran’s say so as to the caliber of any demining? Would insurer rely on that?

³ A friend, who looked and dressed like a rotund academic, is another example. He cheerily described himself as the Antichrist and said, “I rub their bellies and put them to sleep. Only years later do they realize what I did to them.”