Gideon Rachman: The Iran crisis has not yet peaked

Key topics:Ceasefire holds amid conflicting claims and "fog of peace" confusionStrait of Hormuz dispute threatens energy prices and global economyUS-Iran distrust over nuclear deal risks escalation despite talks.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox every morning on weekdays. Register here.Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..By Gideon Rachman.The fog of war is a familiar idea. The US and Iran are now introducing the world to a new concept — the fog of peace.A ceasefire is in place in the conflict between America, Israel and Iran. But little else is clear. This week began with the Americans saying that new peace talks were about to begin and the Iranians denying it. Will the current ceasefire last beyond Wednesday? Has Iran offered to stop all nuclear enrichment? Will the Strait of Hormuz stay closed or reopen?It all depends on who you ask — and when you ask them. On Friday April 17, President Donald Trump announced triumphantly that “Iran has agreed to never close the Strait of Hormuz again”. The following day Iran announced it was closing the strait.Peering through the fog of peace, here is my best guess of what is likely to happen next. The good news is that both Iran and the US want a peace deal. The Iranians know how vulnerable they are to further aerial bombardment. The Americans understand the threat to the global economy from the continued closure of the strait..Read more:.Oil drops, risks remain: What the Iran ceasefire reveals about a fragile global economy - Joan Swart.The bad news is that the two sides distrust each other and remain far apart on all the crucial issues. These include nuclear enrichment, freedom of navigation, sanctions relief, the future of Lebanon and Israel, Iran’s missile programme and its support for regional proxies such as Hizbollah.In normal circumstances, unravelling all these issues would take months — even years. The Iran nuclear deal (known as the JCPOA) that was signed in 2015 — and then ripped up by Trump in 2018 — took roughly three years to nail down.However, the world economy cannot wait months for negotiations to come to fruition. The continued closure of the Strait of Hormuz will keep driving up energy prices. A shortage of jet fuel may make itself felt in weeks. Farmers around the world are aghast at the rising price of fertiliser — and that will soon feed through into food prices. America’s blockade of Iran will also increase the direct economic pressure on the Islamic republic.The key questions now are: will rising economic pressure force the two sides to reach an agreement at diplomatic warp speed? Or will the difficulty of closing the gap between the Iranian and US positions lead to a breakdown in talks and an escalation of the conflict?Either outcome is possible — but my money is on escalation. If that is right, then the Middle East and the world economy have not yet seen the worst of this crisis.Escalation is likely because both the US and Iran seem to feel that they can force the other side to crack first. US vice-president JD Vance returned home from failed talks with the Iranians in Pakistan on April 12 in an upbeat mood — telling confidants that the US blockade would probably force the Iranians to fold within a few days.But throughout this conflict, the Trump administration has consistently overestimated America’s ability to bend Iran to its will and underestimated the Iranian regime’s resilience. That pattern now threatens to repeat itself.America may already have initiated a new cycle of fighting by seizing an Iranian vessel. If the US escalates further by, for example, following through on President Trump’s threat “to knock out every single Power Plant and every single Bridge in Iran” — then Iran is much more likely to hit back than to fold. Iranian retaliation could include hitting oil refineries and offshore platforms in the Gulf — or encouraging the Houthi rebels in Yemen to follow through on their threat to shipping that goes through the Red Sea.Any of those moves would significantly worsen the global energy crisis. Even as things stand, the Iranians know that the current blockage of the strait will have increasingly acute effects on the world economy.The coming weeks, and perhaps months, are likely to see periods of escalation, mixed with periods of talks — with the two processes sometimes running side by side — as Iran and the US test each other’s will. Some issues will prove easier to resolve than others. Iran is probably not currently enriching uranium — so might agree to an indefinite moratorium in return for American acceptance of its legal right to enrich.Tehran’s determination to impose some sort of toll system on the Strait of Hormuz could prove the knottiest problem of the lot. But even here, creative diplomatic minds are at work. What if the revenues were split between Iran and Oman (or even the US, as Trump has suggested) — and then dressed up as a temporary postwar reconstruction fund?.Read more:.The Economist: Has Trump’s ferocious Iran attack actually worked?.There are further “known unknowns” that could complicate matters. How much economic pressure is Iran under and how divided is the regime? The evidence seems to be that hardliners are gaining influence in Tehran. On the American side, it is unclear whether, beneath his bravado, Trump truly understands the limited nature of his military options. Israel’s role is also unpredictable. Could the Netanyahu government provoke another crisis if it does not like the way negotiations are going?Financial markets ended last week on an upswing — apparently convinced that the worst of the crisis is over. That assumption looks complacent..© 2026 The Financial Times Ltd.

Gideon Rachman: The Iran crisis has not yet peaked

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