The geopolitical disaster authored by U.S. President Donald Trump and Israeli Prime Minister Benjamin Netanyahu has done far more than squander the dominant position both nations were in just three and a half months ago.
Their unprovoked and failed war against Iran has likely set in motion a sea change in global power balances—a shift that will leave both the United States and Israel relatively weaker in the months and years to come.
Trump is now a seriously diminished figure at home and around the globe, his world-beating bluster turned to ash and empty threats. For the foreseeable future, the projection of U.S. power will no longer be as ominous as it once was—not just in the Middle East, but in the Indo-Pacific and Europe as well.
The memorandum of understanding (MOU) signed this week is effectively a surrender document—for Washington, that is. Apparently, in exchange for doing nothing more than signing the MOU, agreeing to 60 days of talks, and opening up the Strait of Hormuz, the Iranians will gain financial concessions that would have been unthinkable a few months ago. These could include the release of at least some frozen or restricted Iranian funds and assets, as well as waivers available “immediately upon the signing of this MOU” for “the export of Iranian crude oil, petroleum products and derivatives, and all associated services, including banking transactions, insurances, transportation, etc.,” according to the MOU released by the Trump administration.
To sum up: The U.S. president gained nothing at all in his war—far less than nothing, actually—in return for spending tens of billions of dollars and costing thousands of lives, including at least 13 Americans killed. To win vague promises from Tehran, Trump did major damage to the newly inflation-plagued U.S. economy; betrayed his political base at home; seriously depleted the U.S. critical weapons supply; empowered China and heightened its relative stature; alienated U.S. allies; and weakened the Gulf states.
And all at the hands of a regime, the Islamic Republic of Iran, that only three and a half months ago was isolated and economically devastated. Thanks to the war, even a severely weakened Iran has now become a significant geopolitical player—one that will soon reap new financial windfalls. The regime in Tehran has established its legitimacy over 47 years of existence largely by adopting a martial everybody-is-against-us mentality; now it can boast that it has successfully stood down the global and regional superpowers.
A man crosses a street past a billboard depicting the Strait of Hormuz with a caption in Persian reading “Forever in Iran’s Hand” at Vanak Square in Tehran on May 25.Atta Kenare/AFP via Getty Images
And because of Tehran’s continuing ability to control the Strait of Hormuz and use it to extract concessions from Washington and the Gulf nations, Iran also enjoys leverage that it never had before over the region and the global economy.
The Iranians “now know the power of the strait,” said Reuel Marc Gerecht, an Iran expert and former CIA officer. “They’re probably going to use it to deconstruct the entire sanctions architecture that’s been set up since [former U.S. President] Bill Clinton.”
Trump managed to achieve this outcome by risking something that history shows does not work—regime change from the air—while ignoring a major threat that U.S. intelligence had long warned would likely ensue: Iranian seizure of the strait.
The president’s humiliation was oddly on display in France this week, when he solicited support for the MOU from European allies whom he’d been routinely insulting over the past year. According to one European diplomat, the change in mood was palpable—in contrast to a year ago, when Trump bolted the G-7 meeting in Canada after one day.
Trump adjusts his suit during the G-7 summit in Évian on June 16. Mandel Ngan/AFP via Getty Images
While many European leaders are privately acknowledging that the MOU gives Iran an advantage, the G-7 nations felt they had to support it as the only means of ending a war that none of them supported. “Everybody is now much more aware of the fragility and vulnerability of the world economic system,” said the European diplomat, who spoke on condition of anonymity.
Other diplomats noted that Trump bowed to European pressure and signed on to a new G-7 commitment to support Ukraine and strengthen sanctions against Russia. That was notable after many months in which the president temporized over U.S. support for Ukraine while displaying a willingness to accommodate Russian President Vladimir Putin. The G-7 host, French President Emmanuel Macron, hailed the “very deep change in the U.S. approach.”
What is most significant about this coming era of U.S. retrenchment, perhaps, is that Iran—and now the entire world—is suddenly aware of how it can exploit Trump’s worst vulnerability. That is the president’s deep fear of a market downturn on his watch and his resulting tendency to TACO (Trump Always Chickens Out), whether over his tariff wars or his demand to seize Greenland.
No nation is more attuned to this weakness than the United States’ No. 1 rival, China.
The Chinese were the first to apply that economic pressure on Trump over his tariff war last year—forcing the president into an earlier “truce” by halting the export of critical minerals, which threatened to paralyze the U.S. high-tech and defense sectors. Chinese President Xi Jinping is no doubt now probing the softness of Trump’s support for Taiwan, especially his unwillingness to risk another major war.
On Wednesday, Trump effectively admitted that his desire to be seen as a great economic president is his Achilles’ heel—and suggested that the markets have final say on many of his policies—at a news conference in France at the end of the G-7 meeting.
“The one president I did not want to be was the late, great Herbert Hoover,” he said, referring to the U.S. president who oversaw the 1929 market crash and start of the Great Depression. “I didn’t want to see an economic catastrophe. … Every time we talked about the prospect of peace, the stock market shot up like a rocket ship. … The stock market is more brilliant than anybody there is, including the people on this stage, other than me of course.”
In contrast to his earlier demand for “unconditional surrender” and calls for regime change in Iran—a longtime goal of U.S. policy toward the Islamic Republic—Trump has now committed Washington to “refrain from interfering in each other’s internal affairs.”
And based on the MOU, Trump is not only committed to sponsoring a $300 billion reconstruction program for Iran—apparently paid for by some of the very Gulf nations that Iran attacked during the war—as well as to immediately lifting constraints on Iranian oil sales. According to the MOU, Trump is also willing to negotiate away most if not all of the sanctions regime against Iran, including many of the same ones he imposed in his first term. If implemented, this would allow Tehran to rebuild its financial power and placate its restive population while it continues to string along Washington during negotiations.
The 2015 nuclear deal that Trump withdrew from and called the “worst deal ever negotiated,” by contrast, only phased out the sanctions imposed over Iran’s nuclear program. That pact also imposed highly intrusive International Atomic Energy Agency (IAEA) inspections that no longer exist, and it shipped about 98 percent of Iran’s enriched uranium—which was far less potent than the up to 60 percent-enriched uranium Iran currently possesses—out of the country. That meant Tehran didn’t have enough left for a single bomb. The current MOU indicates that Washington might be willing to allow Iran’s much larger present stock of enriched uranium to be diluted “on site”—within Iran—under the supervision of the IAEA. But the agency’s participation has yet to be negotiated.
Posters with images of Trump, Israeli Prime Minister Benjamin Netanyahu, and U.S. Defense Secretary Pete Hegseth as targets are seen hanging on a wall in Qom, Iran, on May 26. Majid Saeedi/Getty Images
As for Netanyahu, his comeuppance could not be more complete. Until Feb. 28, Israel had gone a long way toward changing “the balance of power in the region for years to come,” as Netanyahu had boasted in 2024. In the nearly three years since Hamas’s brutal invasion on Oct. 7, 2023, Israel had made dramatic strides to restore its strategic edge against Iran and its proxies. Israeli forces damaged Iran’s nuclear and missile facilities and air defenses; killed off Tehran’s senior leadership and nuclear scientists; decapitated and disabled Hezbollah; and even assassinated Hamas’s political leader in the heart of Tehran.
Now, by launching what appears to be a war too far, Netanyahu has managed to re-empower his worst enemy, Iran, and alienate his closest ally, the United States. He has created the sort of breach in U.S.-Israeli relations that no one in U.S. politics thought was possible only a few years ago.
The U.S.-Israel rupture will only get worse if, as expected, Netanyahu decides to defy the agreement and remain in Lebanon to fight Hezbollah.
Netanyahu views the confrontation with Iran through a “messianic lens,” which “creates a growing friction with the United States,” said Danny Citrinowicz of the Atlantic Council, a former Israel Defense Intelligence official. “The disagreement is not merely tactical; it reflects different assessments of risk, escalation, and the role of diplomacy.”
At a White House briefing on Thursday, Vice President JD Vance openly criticized Netanyahu cabinet members for attacking the deal. “Donald J. Trump is the only head of state in the entire world who is sympathetic to the nation of Israel at this moment in time,” Vance said. “If I was in the cabinet of the Israeli government, I might not be attacking the only powerful ally that I have anywhere left in the entire world.”
In a humiliating rebuke, Israel was not made a party to the MOU—even though it began the war in close coordination with Washington. And the United States and Iran agreed in the memorandum to the “immediate and permanent termination of military operations on all fronts, including in Lebanon.” Israeli hard-liners are insisting they will not be bound by the agreement.
Israel was already losing large swaths of support inside the Democratic Party for its conduct of the war in Gaza. Now Israel is hemorrhaging support on the right—starting with MAGA anger over the growing belief that it was Netanyahu who hoodwinked Trump into betraying his campaign promises and starting a disastrous new Middle East war.
Protesters chanting slogans and carrying banners gather at Paris Square to demonstrate against Netanyahu in Jerusalem on June 13. Mostafa Alkharouf/Anadolu via Getty Images
In a March 1 statement, the Israeli leader praised the assistance of “my friend, U.S. President Donald Trump,” in allowing Netanyahu “to do what I have yearned to do for 40 years: smite the terror regime hip and thigh.” Both Secretary of State Marco Rubio and GOP House Speaker Mike Johnson have indicated—though Trump officials denied this—that Trump decided to go to war because “Israel was determined to act with or without us,” as Johnson said.
But the two leaders soon began to part ways over the quagmire they created together—especially when it came to Israel’s invasion of Lebanon, the cessation of which was a key Iranian demand. “Everybody hates you now. Everybody hates Israel because of this!” Trump reportedly yelled at Netanyahu in a phone call on June 1.
In his blunt, careless way, the president was giving voice to a rising belief on both sides of the political aisle that something profound has changed in U.S. politics: Traditional support for Israel, once a largely unquestioned tenet of both party platforms, is fast becoming a political liability. Israel could be in danger of losing not only its only real ally, but its main strategic pillar of support in the world.
Now many Israelis who once supported Trump believe that he “threw us under the bus,” said Nimrod Novik, a former senior advisor to late Israeli leader Shimon Peres who is now with the Israel Policy Forum. “The overwhelming reaction [to the MOU] was beyond disappointment.”
“Netanyahu’s life mission was to get to this point of Feb. 28, to get the U.S. and Israel to fight together against Iran,” Novik added at a digital forum on Wednesday. “The promise was fulfilled, and it is no more.” He added: “I don’t see another president who will fall for the same exercise the next time.”
What might undermine Trump the most during his remaining two-plus years in office is the idea that he, like previous presidents, has now run headfirst into the limitations of military force.
And Iran, which has been a major burr in the side of U.S. presidents for 47 years, can claim the upper hand. Sensitive to criticism that he negotiated a bad deal, Trump threatened again at the G-7 summit this week that if Iran doesn’t comply, “We’ll go right back to dropping bombs right smack in the middle of their head.”
But his bellicosity no longer has the same bite.
“Repeatedly, Trump refused to fight the battle of Hormuz; yet, in Iranian eyes, it’s the only battle that mattered,” Gerecht said. “Trump can’t now threaten to do something in the future that he repeatedly declined to do in the past. At best, the president will default to some milder form of economic warfare when Tehran doesn’t do what Trump thinks they should do. This doesn’t intimidate; it just reaffirms U.S. vacillation and weakness.”
