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Iran War: What Happens When the US Hits the Limits of Escalation Options?

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A bizarre and disconcerting effect of the Trump presidency is the way the press and pundits seen unwilling to take reasonably probable, very bad outcomes seriously. We said from the outset that the US/Israel v. Iran conflict would be a test to destruction. It seemed and still seemed likely that the global economy, and in particular the welfare of poor individuals and states, would be first in the line of fire. But in a bad downside scenario, even the more affluent take hits.

Perhaps I have missed it, but I have yet to see anyone game out the possible bad trajectories. And in tightly coupled systems, here extended supply chain made even more fragile with “just in time’ inventory practices, “for the loss of a nail, the shoe was lost” type breakdowns can multiply quickly and become catastrophic. In mid-2007, I gueestimated the odds of a financial crisis at 25% to 30%, which I thought was uncomfortably high. But no one, and I mean no one, who predicted a financial crisis imagined that it would come about as the4 gut-wrenchingly fast near-collapse of the global financial system of September 2008.

The world is moving into a major and potentially catastrophic change in our geopolitical and economic order. Yet normalcy bias reigns supreme. Too few are taking seriously the risk of a global depression due to the US refusing to make concessions to Iran and Iran continuing to choke in the traffic in the Strait of Hormuz to a close to zero level for a protracted period. And the global economy gets there faster if the US and Israel hits critical Iran infrastructure like energy production and Iran starts destroying Gulf State petrochemical assets or desalination plants.

One problem with trying to look at possible trajectories is that too many are assuming rational behavior. As Brandon Weichert said in a recent YouTube discussion, one of Robert McNamara’s lessons from the Vietnam War was that rationality goes out the window 1

If the US were operating rationally, the Administration would be serious about finding a way out. Professor John Mearsheimer keeps saying that Trump “has to shut this down” due to the looming threat of serious harm to the US and global economy. Yet the US has been the party that has been escalating. Running ships through on the Oman side was at best a test. When Iran reacted badly and started making small, then harsher strikes on offending vessels, the US responded aggressively and by pretty much any standard, disproportionately. The Trump ultimatum that ended over the weekend was intended to be rejected and serve as a pretext for serious US bombing, which has now gone beyond the coastal area. Iran responded with fierce and fast responses to each US wave of attacks, and has hit new targets, focusing on logistics, including in Oman and Qatar. Troublingly Iran has also struck energy infrastructure for the first time since the kinda-sorta ceasefire, risking “Oh, let’s see if Iran really will send the world back to circa 1930 lifestyles by wrecking energy output across the Middle East”.

Yet the US is still escalating. Note that this salvo was reported as of evening US time on Sunday:

We’ll provide more kinetic details later but let us stay with the big picture a bit longer.

The US is running out of weapons. It simply cannot keep up intense attacks on Iran that much longer.

The US is also running out of energy stores, which soon will result in a marked rise in gas, diesel, and jet fuel prices and potentially even shortages. Why is Trump still on a path to become the 21st century Herbert Hoover after making clear he did not want to go down in history as That Guy?

Again (and this assumes a measure of rationality), perhaps hawks fed him a fairly tale that any really bad energy or other critical supply crunches won’t hit ’till after the midterms. Or as we have discussed before, perhaps Israel has persuaded the US that it has a new clever plan to deliver a knockout blow to Iran.2

Contrasting with the John Mearsheimer view is Robert Pape, that none of the US and Iran and Israel have gotten what they want from the conflict. Iran correctly sees this war as existential. Israel believe it is existential, which makes it so. The war is existential for Trump and may become so for the global economy if the US refuses to back down.

There is a wee concession to reality on the US side in terms of the great reduction of our war aims. But sadly we are still fixated on getting a win that Iran will not let us have. From Michael Shedlock in Hooray! We Have a New Stated Goal in Iran. Guess the Goal.

Rubio Sets the Goal

“The United States of America hold all the cards. … Our preference is to get the strait back to the way it was, anyone can use it, no mines in the water. That’s what we have to get back to, and that’s the goal.”

Shifting Goals

Victory is now defined as starting a war to get back to where things were before we started the war.

Is that brilliant or what?

As one might expect, the US is still losing. Vessel operators were not happy before the weekend intensification. From LLoyd’s List, on July 10, Hormuz war risk premium surge confirmed:

  • Pricing jumps after this week’s US-Iran clashes
  • Inquiry remains subdued, with very few transits
  • No fall expected until political situation stabilises

And from Lloyd’s List on July 12 in Strait of Hormuz conflict escalates as latest Iran strike leaves boxship on fire

  • Iran hits UAE-owned container ship GFS Galaxy in the Strait of Hormuz, leaving the vessel on fire and prompting the crew to abandon ship, marking the fourth attack on commercial shipping in the waterway since July 6
  • US responds with a third wave of strikes on Iranian military targets, while Tehran again declares the Strait of Hormuz closed, although merchant vessels continue to transit via the southern route
  • Maritime security has been raised to ‘Severe’, with naval authorities advising ships to ignore Iranian radio warnings and coordinate transits with coalition forces where possible

Iran’s latest strike on a commercial vessel and renewed declaration that the Strait of Hormuz is closed triggered another round of US attacks, while naval authorities warned the threat to shipping has reached ‘Severe’

In what I found to be an atypically flabby interview with Brandon Weichert, one section stood out. Former Lt. Colonel Karen Kwaitkowski discussed nuclear strike risk. While she downplays the possibility that the US military would cooperate with a Trump demand to nuke Iran, she concedes that Israel is a free agent and would be eager to go ahead.

From a lightly-edited machine transcript:

Kwaitkowski: There’s no um nobody that’s sane is going to put those guys [American forces] on the ground, in which you would lose a bunch of them in that process and then you’re on the ground and then you’re nothing but a target and what are you going to do? Sit there and wait till the last one dies or I mean that’s that is actually the kind of stupidity that would cause Trump to drop a nuclear weapon. And who wants Trump to drop a nuclear weapon?

Well, the only person I can think of is Israel. And Israel actually doesn’t care if Trump drops it or they drop it. They just want to they just want to >> they want

Weichert [interjecting]: the pretext to…

Kwaitkowski: Yes. And if they can blame us for it, they will because obviously, you know, they don’t want retaliation in in uh in Israel against that. I’m just saying if you if you fight a war till you’re actually weak, seriously weak, and you have one thing that evens it out, that nuclear capability, that is a huge temptation if you’re a prideful country.

Weichert: Trump’s already I mean I remember 10 years ago, 10 years ago, Trump when [in] first month or two in office I think it was December of 2017 or I’m sorry December of 2016 going into his first month in office during the transition, he apparently had a meeting with Rex Tillerson and James Mattis and he stated his confusion as to why we don’t use nuclear weapons to defeat enemies that we were at the time engaged with and this was a huge controversy.

Morning Joe was the only one reporting on it. So, a lot of us kind of were like, “Okay, that’s just more left-wing stuff.” But I think looking back on it, it was true. I think he doesn’t understand nuclear weapons.

Kwaitkowski: No. No. And and why and really why would he why would he? Because he’s had no background in any of this stuff. And you know what he does understand actually is demolition of buildings. You know, the complete [destruction] because that is how you repurpose real estate. Sometimes you have to you buy an old building, you can’t, it’s too expensive to do it. You you you bring it down, you clear it out, and you build a fresh new one. You make money doing that. It’s a win. Everybody’s happy.

Everybody loves a brand new golden building. And so Trump’s…

Weichert [interjecting]: And he would love to be the guy that dropped the bomb. He’d love to be the one. Hey, that’s a big…

Kwaitkowski: I think he wouldn’t mind. And also, he uses way too much of this this nuclear language if he’s really writing these tweets. And I think I think he might be. I don’t know for sure.

Weichert: Oversees them. It’s Natalie that actually posts them, but I know that he sits with her and drafts them.

Kwaitkowski: Yeah. Because he uses language of obliteration, uh, you know, parking, turning, you know, glass, these things that, we associate, we know you’re talking about a nuclear weapon and he knows nothing about the nuclear weapons.

Before you discount these concerns, remember that tails are fat. And give the way all the key parties are dug in and the US will soon be even thiner on potent-seeming option, turning the Israel nuclear dog loose will look even more appealing.

Yet we have way too much normalcy bias and hopium in coverage and expert assessments. See for instance the Financial Times lead story headline:

Using the word “ceasefire” at this juncture is a massive disservice to readers, as in using a subhead to make prominent (and worse, list first) the US claim that the Strait of Hormuz is open. In case you need a further sanity check:

And:

I hate to make an example of the normally very informative Trita Parsi, but he seems incapable of recognizing that over half the wars in modern history have not ended with a negotiated settlement, and this one looks to be particularly unlikely to end tidily. Yet from Aljazeera’s live feed:

Parsi said he did not believe military action “can change the fundamentals of the situation” in favour of either of the sides.

“At best, I think it can lead to scenario in which – after this round of fighting, which seems to be much more intense than the previous ones – they will return to the table, realising that neither one of them can really change the facts on the ground, and as a result, [realise that] some form of a compromise is necessary,” he said.

Again, to cite Robert Pape, struggles for power are zero sum games. Pape has also stressed that Iran cannot afford to make concessions since giving one only paves the way for more. While the Iran negotiating teams, as muscled by Pakistan and Qatar mediators, might have fallen for that trop before, the huge outpouring of anger and demands for revenge over the course of the funeral for the Supreme Leader and other war martyrs looks to have blocked that route.

And to other monster impediments:

The US is now recognized around the world as being agreement-incapable. This condition is fractal, as in you can find the same pattern if you zoom in or out. Consider this observation from Brett Erickson on Twitter:

Unfortunately, they CAN’T normalize Iranian oil exports at this point. General License X effectively has lost its luster because the US has shown the world that they are willing to revoke it at a moments notice. While they certainly can reissue it, GL-X is not the concession it initially was, and has effectively been neutered permanently at this point.

Mind you, we had pointed out that Iran could not rely on any sanctions waivers or relief save complete revocation, since any lesser measures could easily and quickly be reversed. But the US went and made this bloomin’ obvious.

The US and Iran do not trust each other. In the US case, the view amounts to what Robert Barnes calls, “Confession by projection,” which here means the Administration sees Iran as being as fundamentally duplicitous as the US is. But that does not make the sentiment less real or consequential.

Now to kinetic war details. An overview from Aljazeera’s live feed:

  • Iran claims attacks on Jordan, Bahrain, Kuwait, Qatar, and Oman with missiles and suicide drones as fears rise of a return to full-scale war in the Middle East.
  • The US military says it struck more than 140 targets in Iran with explosions reported in the southern port cities of Bandar Abbas, Sirik, Chabahar, Bandar-e Deyr, Jask and Asaluyeh

And from Bloomberg:

  • The US and Iran exchanged fresh strikes overnight into Monday as they continued their tit-for-tat attacks while issuing conflicting declarations over whether the Strait of Hormuz was open to shipping.
  • US Central Command said American forces carried out a new round of attacks to degrade Iran’s ability to threaten shipping in the narrow waterway, hitting dozens of targets including Iranian air-defense systems and missile capabilities.
  • Tehran retaliated with attacks on US allies in the Persian Gulf and beyond, targeting US bases in Kuwait, Bahrain and Jordan, and oil prices rose on fears that renewed clashes could further disrupt flows through Hormuz.

Note that the “tit-for-tat” is yet another investor-confidence-boosting gambit, since it makes the latest exchanges sound like the ritual dust-ups during the earlier days of the MOU. Iran hitting Oman and Qatar and energy assets is a higher level of intensity than before. So to is the number of US strikes, particularly deeper into Iran and closer to the Bushehr nuclear plant. Admittedly the body of the article does indicate the latest bouts are more intense, but this comes well after framing otherwise:

The US and Iran exchanged fresh strikes overnight into Monday as they continued their tit-for-tat attacks while issuing conflicting declarations over whether the Strait of Hormuz was open to shipping.

US Central Command said American forces carried out a new round of attacks to degrade Iran’s ability to threaten shipping in the narrow waterway. Dozens of targets were hit, including Iranian air-defense systems, coastal radar sites, and missile and drone capabilities, Centcom said Sunday in a post on X.

Tehran retaliated Monday with attacks on US allies in the Persian Gulf and beyond, targeting US bases in Kuwait, Bahrain and Jordan, according to Iranian state media outlets. The Islamic Revolutionary Guard Corps said earlier that it had intercepted two vessels it viewed as endangering shipping in Hormuz by proceeding along an “illegal route.”

The latest escalation extends a pattern of attacks and counterstrikes that has continued for about a week. The US attacks over the weekend marked one of the heaviest bombardments since a June agreement intended to halt the fighting, while Iran’s retaliation is also widening, targeting an increasing number of Arab states in the region. Oil prices rose on fears that renewed clashes could further disrupt flows through Hormuz, with global benchmark Brent trading 4.3% higher at over $79 a barrel as of 5:54 a.m. in London.

On Iran hitting energy infrastructure:

The US has been striking the Bushehr nuclear facility, admittedly just the outer parts but that is not doubt meant to send a message:

Iran claims to be hitting US naval assets:

This tweet is very recent and not yet confirmed:

Also fresh and seriously not good. We had left Iran breaking the Saudi-US blockade around Yemen on July 3 on the cutting room floor3. Now there is an escalating fight over Iran flying again to Sanaa:

An important development on the Lebanon front: the Lebanese Army rejects the Israel-Lebanon “peace” deal that US stooge, President Aoun, is trying to get across the line. A key feature is having the US somehow fortify the Lebanese military to rout out Hezbollah. Experts had said that would never happen, for among other reasons, that at least half the troops are Shia. It is still delicious to see this prediction play out. From The Cradle in Lebanese army ‘refuses’ coordination with Tel Aviv as part of US-brokered deal with Israel: Report:

The Lebanese Armed Forces (LAF) has rejected any form of coordination with Israeli occupation troops in south Lebanon, according to an official source cited by local media on 12 July.

The source told Al-Mayadeen that the LAF “remains committed to rejecting any direct coordination with the Israeli occupation.”

“The US will oversee field coordination, but without maintaining any presence on the ground,” the source added.

The source was referring to recent reports on the arrival of a US military delegation to Lebanon, aimed at helping “implement” the Beirut-Tel Aviv deal – which includes the disarmament of Lebanese resistance group Hezbollah.

The source also confirmed what other recent reports have said about the so-called “pilot zone” plan, which comes as part of the US-brokered Lebanon-Israel deal.

“No date has yet been determined for the launch of the ‘pilot zones’ mechanism … [The LAF] will not enter any ‘pilot zone’ until Israeli occupation forces have fully withdrawn from it,” the source went on to tell Al-Mayadeen.

A day earlier, Lebanese military sources made similar comments to Al-Akhbar newspaper – rejecting any cooperation between the Israeli army and the LAF.

The Al-Akhbar report also reiterated the recent doubts cast over the ‘pilot zones’ plan, which has been described as a cover for prolonged Israeli occupation in Lebanon.

“There is no agreement on any ‘pilot’ or ‘model’ zones. The proposal previously put forward by the Israelis was categorically rejected by the LAF. All discussions held in Washington concerned areas that are not occupied and which the Israeli army had been unable to reach,” the source told the Lebanese daily on Saturday.

“The army will not operate under anyone’s command [including Israel]. Its mission is not to clear the ground for the enemy in order to facilitate its entry into areas it failed to reach because of fierce resistance. The army will not be the reason for the occupation of additional Lebanese territory,” it added.

Done for today! See you tomorrow!

_____

1 Influence Film Club’s list of McNamara’s findings as presented in the 2003 Errol Morris documentary The Fog of War:

1. EMPATHIZE WITH YOUR ENEMY

A major conflict, the Cuban Missile Crisis, was diverted through an understanding of the enemy’s intentions, while the Vietnam War is sad proof that blind miscomprehension leads to irreparable destruction.

2. RATIONALITY WILL NOT SAVE US

Our rational minds take us far, and yet some of the greatest truths and mysteries that our lives revolve around exist outside of the rational.

3. THERE’S SOMETHING BEYOND ONE’S SELF

As members of society born into a global community, we have a responsibility to one another and not only to ourselves.

4. MAXIMIZE EFFICIENCY

Find the most efficient way to complete a certain task and approach it accordingly, in order to make the most of available resources.

5. PROPORTIONALITY SHOULD BE A GUIDELINE IN WAR

Killings should be proportional to a nation’s objectives in times of war, and the fine balance between these two must be strictly monitored.

6. GET THE DATA

A stickler for information, McNamara spent his life collecting facts and applying them onwards, stressing the empowerment offered by data.

7. BELIEF AND SEEING ARE BOTH OFTEN WRONG

What are the factors that drive decisions? McNamara stated, “We see only half of the story at times,” while Morris concluded that we only see what we want to see, and contorted sight leads to unnecessary loss.

8. BE PREPARED TO REEXAMINE YOUR REASONING

It is never too late to reverse a decision, especially when it appears to be a unilateral mission, as in the case of the U.S. War in Vietnam.

9. IN ORDER TO DO GOOD, YOU MAY HAVE TO ENGAGE IN EVIL

Opposing forces are the building blocks of existence. We cannot shy away from the evil required on our path to the greater good.

10. NEVER SAY NEVER

Sometimes the seemingly impossible option is the only one that works, and unbelievably unpredictable events rewrite the history books.

11. YOU CAN’T CHANGE HUMAN NATURE

In McNamara’s mind war is a natural facet of the human experience, and he says, “I’m not so naive or simplistic to believe that we can end all war.”

2 I keep defaulting to a cyber attack that would then allow the US to send planes over Iran, as opposed to firing from standoff ranges, and drop monster gravity bombs. Readers who are more knowledgeable can probably come up with better scenarios.

3 From The Cradle Sanaa tests the blockade as Riyadh weighs its next move:

At dawn on 3 July 2026, an Iranian Mahan Air aircraft touched down in Sanaa – the first Iranian flight to reach the airport in 11 years.

The landing cut into a blockade that has long defined Yemen’s airspace and signaled a shift that could reshape the terms of engagement.

The aircraft carried more than 200 Yemeni passengers, many of them sick, wounded, or stranded abroad. It was presented as a humanitarian flight, but the move went beyond that. Since the April 2022 truce, air traffic has been tightly restricted, with routes largely limited to Jordan.

It did not end there. The plane later departed with an official Yemeni delegation to Tehran, reportedly to attend the funeral of martyred Iranian supreme leader Ali Khamenei. The return leg added a diplomatic layer and tied the move directly to wider regional interactions.

Sources in Sanaa inform The Cradle that the flight was coordinated with Tehran as part of an effort to chip away at what they call the Saudi-US blockade. More flights are expected if the route holds. Whether this opens a steady channel or prompts a Saudi response that freezes talks remains unclear.

In a statement, the Ansarallah-aligned Yemeni Armed Forces (YAF) said Saudi aircraft tried to block the landing by entering Yemeni airspace, but were forced back by air defenses. It warned that any repeat would be met with strikes on airports and key sites inside Saudi Arabia.

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2 comments

  1. The Rev Kev

    Trump has gone to war against Iran two times now and this latest series of attacks makes the third. He has been lucky in that he has gotten Iran to cease fire the first two times after Iran launched a symbolic counter hit or two. I don’t think that it will happen again this time. Iran’s hackles have been raised as shown at the Ayatollah’s funeral and will no longer settle for Trump’s promises. When Trump quietly approaches the Iranians for a ceasefire this time, they may tell him ‘We’re not done yet!’ because they know that they are running down the US military machine. Israel might step in and do something stupid like hit Iran’s nuclear power plant but guess what? Israel has one too that can be attacked – along with major water filtration facilities. But I think that Iran will not settle for going the way of Iraq by having the US come in from time to time to mow the lawn by bombing their infrastructure and their people.

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