People walk past a mural showing an American ship targeted by Iranian missiles on a street in Tehran on August 27, 2026.
It has been half a year since the United States and Israel launched military strikes against Iran on August 28. The situation between the US and Iran has shifted from fierce conflict to a stalemate of neither war nor peace, leaving the US in an awkward predicament where it could neither win the fight, reach a negotiated settlement, nor withdraw.
"The most likely outcome is a prolonged semi-war state of blockades, strikes and negotiations," projected Zhu Zhaoyi, Executive Director of the Middle East Institute at the Pangoal Institution, in a recent exclusive interview with South.
The toughest sanctions in history?
Based on Zhu's analysis, Trump's announcement of "the toughest sanctions in history" in late August has made it clear that the US is no longer satisfied with sanctioning Iran and is prepared to further sanction all third parties that help Iran maintain a normal economic cycle, from first-tier sanctions to stronger second-tier sanctions.
According to him, sanctions may focus on four areas. To begin with, they may curb Iranian oil exports and crack down on tankers, shadow fleets and intermediary traders. Second, they may block the channels provided by banks, money changers, offshore companies and alternative settlement systems.
Third, they may put pressure on ports, airports, logistics companies and organizations that help transship Iranian goods. Finally, they may restrict access to the US market and the dollar system for third-country companies that continue to conduct significant transactions with Iran.
If the US implements these sanctions fully, it will amount to a complete financial blockade. But Zhu pointed to a problem: the closer to zero transactions, the higher the implementation cost, since the US has to pressure not only Iran but also, at the same time, Türkiye, Iraq, Pakistan and even some Gulf states.
"The most stringent measures can be very strict, but it's difficult to achieve a truly 100% closure. Ultimately, gray trade, underground finance and political exemptions will still exist," Zhu noted.
The core reason for Trump's shift from an active attitude toward negotiations to prolonged blockades and economic pressure, in his view, lies in a predicament in which the US can neither fight nor negotiate with Iran.
Militarily, the US and Israel have destroyed numerous targets, but the marginal benefits of military operations diminish. Further expansion would rapidly increase costs, casualties, ammunition consumption and oil price pressures.
Diplomatically, as Iran is reluctant to accept the surrender-like agreement demanded by the US, economic warfare has become a third option. It avoids the costs of a full-scale ground war while continuously weakening Iran's finances, foreign exchange reserves and social resilience.
Given the approaching US midterm elections and high oil prices already backfiring on the US, Trump needs to gradually transform a military war into a financial and economic war where the US has a greater advantage.
Likely scenario of the war by 2026
By Zhu's analysis, both the US and Iran are seeking a way to exit the war without admitting defeat while gradually reducing their costs. He estimates a 50 to 60 percent possibility of a de facto de-escalation arrangement by the end of 2026.
"It is not necessarily a signed peace agreement, but via channels like Oman and Qatar, reaching some tacit understandings on issues such as navigation in the Strait of Hormuz, oil exports, the nuclear issue, and the scope of military operations," Zhu elaborated.
The second most likely scenario, in his view, is the continuation of low-intensity conflict and economic blockade. A true return to large-scale, all-out war is not the baseline scenario. The real danger now is miscalculation; neither side is actively pursuing a full-scale war.
Notably, Zhu identified a critical variable in US-Iran relations: Israel, and detailed their differing goals in the war.
Trump needs a pact that allows him to declare at home that America has won, in the hope that Iran will make substantial concessions on nuclear issues, missiles, regional proxies and the Hormuz issue. Israel, by contrast, is more inclined to use this rare strategic window to weaken Iran's nuclear capabilities, missile systems, the Islamic Revolutionary Guard Corps and regional networks for as long as possible.
"As the US and Iran approach a compromise, Israel may worry that the agreement will prematurely freeze battlefield gains," Zhu stated. It can be said that Israel is a crucial door opener and escalator in this war, but ultimately, Washington will bear the brunt of the costs for oil prices, global financial markets and US domestic politics.
"Therefore, an interesting contradiction will emerge: Israel may attempt to drag on the war, while Trump may increasingly prefer to exchange military gains for political ones," he projected.
As for international crude oil prices, Zhu noted that the short-term trend is clearly upward. Brent crude oil hovered around $90 per barrel in late August. The market has repriced the risks of failed US-Iran negotiations, increased US sanctions and continued obstruction of the Strait of Hormuz.
However, oil prices will not necessarily continue to surge if further negotiations fail. "The key to whether oil prices can truly break through to higher levels is not how much rhetoric Trump or Iran makes, but rather how much oil is unable to be exported each day," Zhu noted.
If the Strait of Hormuz remains partially open and Saudi Arabia and the UAE can maintain some exports through alternative routes, oil prices will primarily reflect a high-risk premium. Only if large-scale attacks on ships re-emerge in the strait and exports from major oil-producing countries substantially decline will a second round of sharp increases be possible.
"Therefore, the most important indicators to observe for future oil prices are not news headlines, but rather shipping volumes, insurance prices, and actual exports from the Persian Gulf," he added.
Reporter | Zhang Ruijun
Photo | CFP
