Global oil markets briefly surged to nearly $120 a barrel on Monday before retreating after remarks by Donald Trump suggested that the conflict between the United States, Israel and Iran might soon wind down. In an interview with CBS, the US president declared that the war was “very complete, pretty much,” claiming that Iran had effectively lost its military capabilities. “They have no navy, no communications, no air force,” Trump said.
Yet even as the president suggested the conflict was nearing its end, his own administration appeared to signal the opposite. Earlier the same day, US Defense Secretary Pete Hegseth warned that the war was only entering its initial phase. The contradiction raised immediate questions about Washington’s strategy.
When reporters pressed Trump on the discrepancy, he offered an explanation that blurred rather than clarified the administration’s position. “Both things can be true,” he said. “It’s the beginning of building a new country.”
That statement captured the central dilemma confronting governments, markets and analysts worldwide: after ten days of war between the United States, Israel and Iran, it remains extraordinarily difficult to determine Washington’s actual objectives.
In the span of little more than a week, the US position has shifted repeatedly—from stating it was “open to negotiations,” to demanding “unconditional surrender,” to suggesting the war would end quickly, to pledging more forceful strikes, and finally to speaking of “building a new country.” For diplomats attempting to interpret these signals, the pattern has appeared less like a coherent strategy and more like noise.
Financial markets have responded with sharp volatility. Oil traders pushed crude prices above $120 a barrel earlier Monday amid fears that the war could escalate into a prolonged regional conflict, potentially disrupting global supply routes. The surge reflected growing anxiety over the fate of the Strait of Hormuz, the narrow waterway through which roughly one-fifth of global oil trade flows.
Yet prices fell nearly five percent after Trump’s CBS interview hinted at a possible end to hostilities. The rapid reversal underscored how sensitive energy markets have become to even subtle changes in the White House’s tone.
Analysts increasingly believe traders are reacting less to strategic developments and more to the president’s public statements. With little clarity about US policy, market participants are attempting to interpret the administration’s mood rather than a defined diplomatic pathway toward de-escalation.
The war itself has already delivered severe blows to Iran’s political and military leadership. Among those killed in the opening wave of US-Israeli strikes was Iran’s long-time supreme leader Ali Khamenei, along with dozens of senior commanders from the Islamic Revolutionary Guard Corps and key officials within the Iranian government.
The decapitation of Iran’s leadership has created an immediate strategic paradox for Washington. While the strikes were designed to cripple Iran’s command structure, they have also eliminated many of the figures who previously served as interlocutors in negotiations with the West.
Trump himself acknowledged the problem during a press briefing. “Most of the people we had in mind are dead,” he said. “Pretty soon we are not going to know anybody.”
The war has also begun to produce casualties among US forces. Seven American service members have been killed so far, marking the first US combat deaths in the Middle East since the withdrawal from Afghanistan in 2021. Another 18 soldiers have reportedly been seriously wounded.
While those numbers remain relatively small compared with earlier US wars in the region, they carry significant symbolic weight domestically. The deaths represent the first American battlefield losses in the Middle East in several years, reopening debates in Washington about the costs and goals of renewed military engagement.
Congress has attempted to reassert its constitutional authority over war powers, but those efforts have repeatedly failed. A recent attempt in the US Senate to constrain the administration’s military operations collapsed, marking the eighth unsuccessful effort by lawmakers since June 2025 to limit the president’s war authority.
Criticism has also emerged from within Trump’s own political base. Conservative commentator Megyn Kelly wrote on social media: “I honestly can’t believe we’re doing this again,” reflecting frustration among some right-leaning voters who had expected the administration to avoid new Middle Eastern conflicts.
However, the dissent has not yet reached a level capable of significantly influencing policy. Political analysts note that domestic pressure is unlikely to intensify unless American casualties increase dramatically.
Instead, the most powerful constraint on Washington may come from economic pressure rather than political opposition.
Oil prices above $100 per barrel threaten to push global inflation higher just as many economies had begun to stabilize after years of volatility. Analysts at Goldman Sachs estimate that a prolonged conflict could drive inflation in the United States back toward 3 percent or higher.
Such an outcome would pose a serious political risk for Trump, who built much of his political brand on promising to reverse the inflation surge that occurred during the presidency of Joe Biden. A sustained spike in energy costs could undermine that narrative heading into the 2026 US midterm elections.
In that sense, financial markets may prove to be a more decisive constraint on the administration than congressional oversight or public protests. Rising fuel prices affect voters directly, amplifying the political consequences of a prolonged conflict.
While Washington’s position appears unpredictable, Iran faces an even more complicated strategic landscape.
Only two weeks before the strikes began, Iranian officials were engaged in negotiations with the United States over the country’s nuclear program. Diplomatic intermediaries believed the talks were nearing a breakthrough.
On February 27, Badr Albusaidi, the foreign minister of Oman, announced that the two sides had reached a tentative understanding. According to Omani officials, Iran had agreed to never stockpile enriched uranium and to accept full verification by the International Atomic Energy Agency.
Under the proposed framework, Iran would also downgrade its enriched uranium to the lowest possible level, addressing Western concerns about potential weapons development.
A fourth round of negotiations had been scheduled to finalize the agreement. Instead, the US-Israeli air campaign began the following day.
For Iranian leaders, the timing reinforced a deeply entrenched suspicion about American diplomacy. This was not the first time negotiations had collapsed amid military action. A previous conflict known as the Twelve-Day War erupted in June 2025 under similar circumstances, shortly after another round of talks.
Iran’s foreign minister Abbas Araghchi expressed the prevailing sentiment bluntly. “Negotiate with the US when we negotiated with them twice, and every time they attacked us in the middle of negotiations?” he asked during a televised address.
The assassination of Iran’s supreme leader has accelerated a shift in the country’s political structure. Shortly after Khamenei’s death, Iran’s clerical establishment appointed his son, Mojtaba Khamenei, as the new supreme leader.
The move signals the consolidation of power by hardline factions within the Iranian system. Analysts say the new leadership is unlikely to return quickly to negotiations with Washington, especially given the perception that diplomacy has repeatedly been used as a cover for military escalation.
Iran has already ruled out a ceasefire or surrender while attacks continue. At the same time, the political environment inside the country has made renewed diplomacy extremely difficult.
Even if Iranian leaders wished to reopen talks, much of the diplomatic infrastructure that previously supported negotiations has been destroyed. The Omani mediation channel has effectively collapsed, many of the officials who served as negotiators are dead, and verification frameworks built over years of diplomacy have been dismantled by the conflict.
The result is a war in which both sides may have incentives to de-escalate but neither possesses a clear pathway to do so.
For Washington, the problem lies in credibility. Trump’s shifting statements make it difficult for allies or adversaries to determine whether any proposed agreement would hold. Diplomats accustomed to interpreting US signals have struggled to distinguish policy from improvisation.
For Tehran, the obstacle is political legitimacy. Returning to negotiations after two military attacks during diplomatic talks would be nearly impossible for any Iranian leadership to justify domestically.
This dynamic creates a strategic stalemate in which escalation remains possible even though neither side necessarily seeks a long war.
While the conflict is centered in the Middle East, its most severe economic consequences may be felt thousands of kilometers away in Asia.
The closure of the Strait of Hormuz has effectively disrupted one of the world’s most critical energy corridors. Roughly 60 percent of Asia’s crude oil imports normally pass through the narrow waterway.
Countries heavily dependent on imported energy have already begun to feel the shock. In Thailand, the national stock exchange temporarily halted trading after an 8 percent market plunge triggered by fears of fuel shortages.
The disruption has also spread to natural gas markets. QatarEnergy, the state-owned energy giant of Qatar, has suspended liquefied natural gas exports for the first time in three decades.
The decision carries major implications for countries such as Singapore and Thailand, which rely heavily on Qatari LNG supplies. Singapore alone receives roughly 45 percent of its LNG imports from QatarEnergy.
China has responded by prioritizing domestic energy security. Authorities in China have ordered major refineries to halt exports of diesel and gasoline in order to preserve fuel supplies at home.
That decision has cascading consequences for smaller economies that depend on Chinese refined products. Nations including Myanmar and Pakistan have already introduced fuel rationing to manage shortages.
If the war escalates further, the economic consequences could rival or even surpass those triggered by the Russia‑Ukraine War.
Several potential escalation scenarios worry analysts. Iran could attempt sustained attacks on Gulf energy infrastructure, including oil terminals and desalination plants across the Persian Gulf.
Another possibility is a prolonged closure of the Strait of Hormuz through mines, missiles or drone strikes on shipping. Such an outcome would remove millions of barrels of oil from global markets overnight.
A third scenario involves a large-scale ground invasion of Iran by US or Israeli forces, a step that would dramatically expand the scope and duration of the conflict.
Any of these developments could produce a shock far larger than the disruptions experienced during the Russia-Ukraine war, particularly for energy-importing economies in Asia.
Ironically, even a rapid end to hostilities may not quickly restore global energy stability.
Insurance premiums for tankers traveling through the Persian Gulf have already skyrocketed. Shipping companies are rerouting vessels around Africa or through alternative supply chains, adding weeks to delivery times and raising transportation costs.
Broken supply contracts and disrupted logistics networks could take months or even years to repair. Energy markets tend to react slowly to crises but recover even more slowly once infrastructure and trust have been damaged.
Beyond the immediate economic and military implications, the conflict may leave a lasting mark on global diplomacy.
The perception that negotiations can be interrupted by military strikes—twice within a single year—will likely shape how governments across the Middle East and Asia view US-led diplomatic frameworks.
For states considering negotiations with Washington over sensitive issues such as nuclear programs, security guarantees or sanctions relief, the credibility of diplomatic commitments may now be more heavily scrutinized.
Allies and adversaries alike will weigh the precedent set by the collapse of the Iran talks.
For now, the conflict remains suspended between escalation and exhaustion. Both Washington and Tehran face pressures pushing them toward de-escalation, yet political and strategic realities make compromise difficult.
Markets continue to react to every signal from the White House, while governments around the world scramble to secure energy supplies.
Whether the war expands into a broader regional conflict or gradually subsides into an uneasy stalemate may depend less on grand strategy than on the shifting calculations of leaders under immense pressure.
In the meantime, the brief spike in oil prices to $120 a barrel may prove to be only the first warning of a deeper economic and geopolitical shock now unfolding across the global system.
