Trump’s ‘Epic Fury’ might be over, but the global economy will still be bleeding

Within just two weeks of this month, several significant developments have taken effect in the Iran war, some hinting towards a resolution but most indicating a prolonged period of stalemated conflict.

The most significant announcement was from the US Secretary of State, Marco Rubio, on May 6, when he announced the end of ‘Operation Epic Fury', or the war in Iran. He, however, added that the naval blockade imposed by the US Navy across the Strait of Hormuz will remain in place till it is opened to international shipping by Iran.

Around the same time, President Trump announced a ‘pause’ in Project Freedom, which was launched on May 4, wherein the US Navy was to escort commercial ships through the Strait of Hormuz, evading the Iranian blockade.

Third, the US, alongside Bahrain, Saudi Arabia, the UAE, Kuwait and Qatar, announced a draft UN Security Council Resolution to defend freedom of navigation in the Strait of Hormuz. There was also an announcement of a 14-point peace proposal offered by Iran to the US on May 3, which was reviewed by the US, which in turn sent a counter-proposal to Iran, which Tehran revised and sent back, only to be termed by Trump as “unacceptable”. As of now, the peace process remains in the doldrums.

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Five other developments during the same period were significantly escalatory in nature.

On May 5, the IRGC published a map wherein it drew a clear zone depicting its naval blockade, bounded by two lines, stretching from Qeshm Island and Umm al Quwain (in the UAE) in the west to Mount Mobarak and Fujairah (in the UAE) in the east, virtually enclosing the UAE's territorial waters within its zone of control.

Also, Iran’s Tasnim News Agency, affiliated with the IRGC, also reported that in case there is no permanent end to the war soon, Iran plans to impose fees on submarine fibre-optic internet cables passing through the Strait of Hormuz. This, it reported, was based on its “sovereignty” over the seabed and water column in the Strait of Hormuz under Article 34 of the United Nations Convention on the Law of the Sea. On May 6, Iran also announced the formation of the Persian Gulf Strait Authority (PGSA), a government agency to approve ship transits and collect tolls from vessels passing through the Strait of Hormuz.

However, the most escalatory steps were the exchange of fire in the Strait of Hormuz as well as a brief exchange of missiles and drone strikes between the UAE and Iran. On May 7-8, the UAE was struck by ballistic missiles and drones from Iran (although Iran denied it). The UAE struck back and conducted retaliatory airstrikes against IRGC Navy sites, petrochemical facilities in Bandar Abbas, and other locations, including Qeshm Island.

The next incident was when Iran targeted three US Navy ships, all three Arleigh Burke-class destroyers, USS Truxtun, USS Rafael Peralta and USS Mason, on May 7, with missiles, drones and fast-attack naval crafts. The US responded, targeting Bandar Abbas, Qeshm and Bandar Kargan. During the same week, three Iranian-flagged oil tankers were disabled by the US forces. An F/A-18 Super Hornet targeted M/T Sea Star and M/T Sevda on May 8, while M/T Hasna’s rudder was disabled by US F/A-18 aircraft on May 6.

Where Does the War Stand Now?

The war stands at a very critical inflection point. It is very clear that neither the US nor Iran has any appetite to restart hostilities, but neither is willing to stand down either. The US, particularly, finds itself in a bind because it has got entrapped on an issue which did not exist before the start of the war: the Strait of Hormuz. With Iran making it very clear that there will not be any discussion on the opening of the Strait of Hormuz to normal traffic unless there is a permanent end to the war, the US Navy is stuck enforcing a naval blockade, which it would otherwise not have.

On the other hand, Iran is emboldened with the way the narrative has progressed, especially after the initial announcement of a ceasefire on April 7. At every instance after that, it has been the US which has offered to stand down on the continuation of hostilities with Iran, not conceding on any demand. Plus, Iran has discovered the monetary and the political value of the Strait of Hormuz, which it now intends to encash monetarily as well as diplomatically in the future.

Secretary Rubio stated in his announcement of the winding down of operations that the US had achieved its military objectives. A brief review of the same, however, presents a completely different picture. There were three objectives set out by the US at the start of the war, and all three look far from being accomplished. The first objective was that Iran can never have a nuclear weapon. It entailed further destroying any nuclear enrichment capability that Iran may have despite the ‘complete obliteration’ of Iran's nuclear capabilities in June 2025 during the ‘12 Day War’. Connected with this was an objective that Iran should hand over 450 kg of enriched (60 per cent) uranium to the US and also make a commitment of complete stoppage of enrichment for at least ten years. On both counts, Iran has made it clear that it is not going to comply.

Second was the complete destruction of Iran’s ballistic missile programme, which could pose an imminent threat to the US in the future. Despite the intense military campaign by the US and Israel and initial claims that 70-80 per cent of Iran’s missile inventory and almost 80 per cent of its mobile missile launchers were destroyed, fresh assessments and reports indicate that Iran still retains a large inventory of missiles and its launchers. Plus, its defence industry is rapidly replenishing the missile stock. In fact, a recent report in the US states that Iran retains up to 70 per cent of its ballistic missile capabilities and is fast building additional capabilities.

The third and implied objective was a regime change in Iran. Despite the killing of the Supreme Leader and more than 50 top leaders and military generals, the regime has survived. In fact, Mojtaba Khamenei would not have become the Supreme Leader under normal succession circumstances, as hereditary succession is not encouraged in the Iranian structure. Also, Mojtaba is known to be close to the IRGC and more radical than his father. Plus, the war imposed on Iran has rallied the nation together like never before, including many major dissident voices joining the mainstream population, standing in solidarity with the nation. The combined effect of all this is that the regime appears stronger, more resilient and more radical than earlier.

The Global Economy is Bleeding

More than 60 days into the war and the closure of the Strait of Hormuz, the strain on the global economy has become severe, and the continuing double naval blockade (by Iran and the US, on either side) is beginning to become critical. Against an average flow of around 12 million barrels of oil constituting almost 20 per cent of global oil flow through the Strait of Hormuz before the war, the average outflow has drastically reduced to a trickle.

Against an average of 120-130 ships that used to transit the Strait, the numbers have been reduced to single digits. Although the pipelines of Saudi Arabia and the UAE carrying oil directly into the Red Sea can carry around 5 million barrels per day, the deficit in oil supply has started hurting the global economy. States like Kuwait and Qatar, which are completely dependent on the Hormuz route, are finding themselves completely cut off.

The International Energy Agency has warned that the current crisis is the largest disruption in the history of the global oil market. Continued closure is severely threatening global energy security and is likely to create a jet fuel shortage in Europe within weeks, which could cause significant price surges.

Despite the release of 400 million barrels from global strategic reserves, the severe shortfall in crude oil supplies is likely to only multiply in coming weeks. JP Morgan, in its assessment published by Bloomberg on May 9, has stated that if the oil supplies keep falling, the oil inventories could fall to 6.8 billion barrels by September this year, which would then threaten the minimum threshold to keep the oil pipelines and refineries functional across the globe.

The gasoline prices have started rising sharply and have started having an adverse impact even in the US, where the prices have risen from $2.8 per gallon to almost $4.8 and are rising, adding to the overall cost of living and inflationary pressure. Spirit Airlines in the US has announced an immediate, permanent shutdown after 34 years of operation, driven by unsustainable financial pressure from skyrocketing Aviation Turbine Fuel (ATF) prices. Europe is facing a double whammy due to reductions in supplies of crude oil and gas from West Asia as well as Russia. With only a few months left of the summer, alarm bells are ringing in European capitals.

In India, the strategic oil reserves could come under pressure if the diversified oil imports are not able to completely substitute the supplies from the Gulf region. India imported almost 60 per cent of its 2 billion crude oil imports from this region. If the supplies from Russia, Venezuela and others are not able to replace the deficit from the region completely, India too might face inflationary pressure and energy security issues. Already, LPG and LNG supplies are becoming a stress point as there are very few alternatives to replace the supplies from the Gulf region, especially Qatar. There is also the case of vital imports to the Gulf region from India, including perishable items like food products, basmati rice, medicines, etc, although some reports indicate that Oman has pitched in to help India and the Gulf region in this regard by offering its ports of Salalah and Sohar for this trade.

Looking Ahead

The war in Iran shows no signs of ending. With both the US and Iran having very divergent positions on critical issues, it is going to be extremely difficult to find convergence. President Trump, who is scheduled to travel to China on May 14, is looking for an early and big announcement which Iran does seem interested in. China has shown no interest in pressuring Iran to submit to American demands and has watched keenly how the vulnerabilities and weaknesses in the American military capabilities have been brutally exposed in this war. In such circumstances, the visit to China may prove nothing more than a ceremonial hand-shake.

The continued closure of the Strait of Hormuz is testing the threshold of tolerance every day, and unless there is a resolution to it soon, the world may be in for a crisis like never before. While the US would be very happy to let other issues be postponed for the future in case the Strait of Hormuz is opened, Iran is in no such mood. It is looking at a permanent end to the war and recognition of its sovereign rights (including nuclear enrichment) as well as some kind of leverage over the Strait of Hormuz in the future too.

Also, on May 10, Iran has declared that any future targeting of its ships may invite direct military response on American ships and bases in the region. In such a situation, the war looks deadlocked with no quick solutions. Like Gaza, this is yet another unending war of attrition looming on the horizon.

(Col Rajeev Agarwal is a West Asia expert and a Senior Research Consultant at Chintan Research Foundation, New Delhi. His X handle is @rajeev1421. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views.)