As Washington and Tehran trade messages in search of yet another cease-fire, the Trump administration must revisit the faulty assumptions that got it stuck in a costly war in the first place. The administration has repeatedly fallen prey to the sunk cost fallacy. In the face of this strategic failure, President Donald Trump has mostly acted as if the problem were one of scale or duration. In reality, U.S. negotiating leverage has diminished as the war has progressed and will likely continue to erode as the United States exhausts its munitions and domestic political consequences mount. New Houthi attacks on Saudi oil exports add precarity to a war that has already induced global economic shocks, damaged U.S. credibility, and put America’s regional allies in the middle of a conflict they advocated against.
Yet even as Tehran’s position hardens, a protracted war is not good for Iran either. The regime has benefited politically by casting itself as the victim of U.S. and Israeli aggression, but Iran was facing existential political and economic challenges before the conflict began. Every day the war drags on, and every bridge or business that warplanes destroy, only lengthens the road to a potential recovery for the regime. But to end the war, Iranian leaders need to believe that recovery is possible.
As Washington and Tehran trade messages in search of yet another cease-fire, the Trump administration must revisit the faulty assumptions that got it stuck in a costly war in the first place. The administration has repeatedly fallen prey to the sunk cost fallacy. In the face of this strategic failure, President Donald Trump has mostly acted as if the problem were one of scale or duration. In reality, U.S. negotiating leverage has diminished as the war has progressed and will likely continue to erode as the United States exhausts its munitions and domestic political consequences mount. New Houthi attacks on Saudi oil exports add precarity to a war that has already induced global economic shocks, damaged U.S. credibility, and put America’s regional allies in the middle of a conflict they advocated against.
Yet even as Tehran’s position hardens, a protracted war is not good for Iran either. The regime has benefited politically by casting itself as the victim of U.S. and Israeli aggression, but Iran was facing existential political and economic challenges before the conflict began. Every day the war drags on, and every bridge or business that warplanes destroy, only lengthens the road to a potential recovery for the regime. But to end the war, Iranian leaders need to believe that recovery is possible.
There are certainly powerful entities in Iran that favor continuing the war. But the majority of Iran’s leading decision-makers supported the June memorandum of understanding and comprehend that a war cannot continue indefinitely. Ultimately, both sides should have strong motivations for ending the war, and despite the bleak outlook, the United States still has opportunities to exit in a way that could strengthen its long-term standing in the region. But this requires more than inking a quick-win deal to bring down gas prices before the U.S. midterm elections. The administration must craft a more durable agreement on the Strait of Hormuz that avoids dangerous precedents for freedom of navigation. Such a deal will require significant near-term inducements to Iran. But if combined with a broader strategy that includes shoring up the resilience of Arab Gulf partners and rebuilding a consensus around Iran policy with key U.S. allies, the United States can achieve the more comprehensive diplomatic solution Trump is seeking.
A photo obtained from the Iranian news agency Tasnim shows an Islamic Revolutionary Guard Corps boat allegedly taking part in an operation to seize ships attempting to cross the Strait of Hormuz on April 21. Meysam Mirzadeh/AFP via Getty Images
There is a myth in Washington that pressure alone can break Iran. For nearly five decades, the United States has used every form of military, economic, and political pressure available to try to bend Iran to its will. It has not worked. Pressure has occasionally shaped Iranian decision-making but only when paired with other tools, such as inducements, coalitions, mutual respect, and patience. If Trump continues to believe Iran will simply surrender to U.S. power, he will fail.
The MOU between the United States and Iran appeared to acknowledge this reality, but it still failed for two reasons. First, details matter. Ambiguity in sections 4 and 5, which addressed the Strait of Hormuz, made the cease-fire inherently fragile and ultimately contributed to its collapse. Each side could credibly blame the other for failing to meet its commitments. Second, decision-making in both countries is driven more by short-term domestic perceptions than long-term strategic gains. Influential constituencies in both Washington and Tehran oppose a diplomatic solution in favor of continued conflict. Complicating matters further, each side sees itself as the victor. The United States remains the superior military power, but Iran survived an existential war, absorbed and imposed serious costs, and shifted the regional balance of power through its control over Hormuz. While the United States is more powerful by every conventional measure, Iran’s political will for continuing the war remains stronger. The result is that Washington and Tehran both treat negotiations as surrender—while disagreeing over who is doing the surrendering.
The key to any sustainable deal is that both parties need to be able to legitimately claim victory. Both sides can best accomplish this by aiming for small, concrete results. For the United States, this means reversing active unilateral Iranian control over the passage of ships through the Strait of Hormuz and a viable pathway to a future nuclear deal. For Iran, it means significant financial compensation and the acknowledgement of its newfound position in the strait.
The parties could achieve these objectives by reconfiguring aspects of the MOU. The United States should be prepared to end attacks, lift the blockade, and reissue General License X—the Treasury Department action authorizing Iranian oil sales—without a specified end date to secure Iranian cooperation on the strait. The general license would stay in effect as long as Iran avoids any obstruction over the passage of ships. This is a meaningful and permanent economic concession for Iran but one that the Trump administration has already issued twice on a temporary basis.
Acknowledging Iran’s expanded role in Hormuz is more complicated. The key U.S. objective should be to avoid finalizing a mechanism that: 1) creates a negative precedent that undermines freedom of navigation elsewhere and 2) allows Tehran to leverage administrative control over the passage of ships to extract continual concessions from the Gulf or other parties.
Omani officials were in Iran over the weekend proposing a regional body to oversee maritime security and other responsibilities in the Strait of Hormuz. But a purely regional body—especially one with a security mandate—is vulnerable to intraregional disputes. And a security mandate could provide a cover for aggression in the waterway. Muscat and regional mediators should instead propose a mechanism under U.N. auspices that includes Iran, Oman, and a rotating seat for other Gulf countries. This mechanism should focus on remotely monitoring traffic through the strait and settling transit disputes where applicable. Under such a model, the United Nations would enshrine Iran’s leading role in the strait, but it would constrain how Tehran operationalizes that role to ensure compliance with international conventions and to help limit a single party’s ability to unilaterally obstruct the passage of licit shipping. Further, the aforementioned sanctions relief would compensate Iran elsewhere, making tolls or fees unnecessary.
For the United States, the clearest benefit of such an arrangement would be an immediate exit from the war’s escalation loop and a less damaging management structure for the strait. Rather than eroding the principle of freedom of navigation, establishing a U.N. mechanism to monitor traffic through the strait could bolster international norms and conventions while providing much-needed transparency and deconfliction channels.
A small deal on Hormuz may also increase the odds of a future nuclear deal. Neither side believes the other can meet its commitments, and successful implementation of a smaller arrangement will likely be a prerequisite for a more ambitious deal. The good news is that Washington still retains sufficient incentives necessary for a more comprehensive deal, including access to global banking, trade, and investment. Although Trump may not realize it, with the MOU in place, he also has the luxury of patience. Section 9 of the MOU—which commits Iran to maintaining the status quo of its nuclear program—is an often overlooked benefit to the United States. As a result of the 12-day war in June 2025, Iran is not currently enriching uranium or building new centrifuges. Locking that reality into place pending further negotiations buys the United States valuable time and is something Trump can tout as part of a smaller, but more sustainable, first-step agreement.
A visitor to the Museum of Islamic Art takes pictures of the minaret of Al-Fanar Mosque in Doha, Qatar, on July 9.Getty Images
A small, sustainable deal with Iran will halt large-scale hostilities and major disruptions to the global economy, but it won’t fully address the threat Iran poses to its neighbors. Beyond the strait, Iran’s most effective wartime strategy has been striking U.S. partners directly—countries that host energy, digital, and economic infrastructure vital to the global economy. Washington must complement any Iran deal with sustained support to help the Gulf build resilience against future attacks and disruptions.
Because U.S. equipment alone cannot resupply Gulf air defenses, this means embracing layered, integrated air defense built in collaboration with European and Asian partners. It also means new trade and energy infrastructure: While Saudi Arabia and the United Arab Emirates are already easing their dependence on the strait through new pipelines and port expansions, Bahrain, Kuwait, and Qatar lack similar outlets. Building such infrastructure is difficult in the current environment, but U.S. diplomatic leadership can provide the momentum and private sector confidence needed to get projects moving and, in the process, reduce Iran’s long-term leverage over Hormuz.
Additionally, the United States must cooperate quietly with Gulf countries to help them develop their own coordinated strategy for dealing with Iran going forward. Washington tends to view any Gulf engagement with Iran as a threat to the United States. But the reality is that Gulf countries must strike a careful balance between engagement and deterrence with Iran. If the United States does not accept this reality, it will only increase the likelihood that Gulf partners pursue engagement strategies that undermine the U.S. approach to Iran, such as facilitating sanctions evasion. Alternatively, if Washington embraces a more pragmatic approach that recognizes the impossible position Gulf capitals are in, it may be able to help Gulf capitals forge a more coordinated regional approach that makes it harder for Tehran to exploit divisions among them. Distrust and divergent strategies across the region mean that a fully unified Gulf approach to Iran is unlikely, but in the past the United States has leveraged its convening power and broad partnerships to promote stronger Gulf alignment on regional challenges. To do so now, the United States will need to change course and embrace a more collaborative approach to its own Iran policy that considers the needs of its Gulf partners on the front lines of the war.
French President Emmanuel Macron sits in a French naval helicopter as he travels to the aircraft carrier Charles de Gaulle, deployed in the Mediterranean Sea, at Chania International Airport on the Greek island of Crete on March 9. Jeanne Accorsini/AFP via Getty Images
One of the most dangerous assumptions about Iran is that Washington alone can fix the problem. This assumption drove the Trump administration to launch the Iran war without getting the buy-in of key Gulf partners and European allies, and it continues to dominate U.S. efforts to bring the war to an end. Gulf capitals have long complained that Washington treats them like ATMs—failing to consult them on major Middle East policy decisions while routinely mining them for resources to manage the consequences of those policies. Europe maintains its own set of unique incentives and leverage over Iran. The reality is that the United States must bring to bear the leverage of its partners in the Middle East, Europe, and Asia if it is going to craft a durable solution to Iran’s nuclear program and attempts to control the Strait of Hormuz. To do so now, when U.S. credibility is at unprecedented lows and its power is increasingly contested, Washington must also abandon its tendency to impose its approach on others and instead seek to build a consensus approach.
In the absence of U.S. leadership on a consensus Iran policy, U.S. partners are seeking to build alternatives. A senior European diplomat recently told us that they’ve fielded more calls from Gulf leaders in the past few months than in the previous decade. Because the United States has failed to secure the Strait of Hormuz, the United Kingdom and France have stood up a maritime initiative involving some 40 countries to potentially manage post-cease-fire security operations there—without Washington at the table. The Gulf itself is moving, too: Saudi Arabia recently proposed a regional security dialogue with Iran and is exploring whether deeper partnership with Pakistan can help shape Iran’s behavior. These initiatives demonstrate that U.S. partners are willing to step up and assume the kind of burden-sharing Trump has long called for—but they will do so on their own terms.
These efforts could be assets for U.S. policy, not threats. If framed appropriately, a European maritime monitoring mission could provide an on-the-ground presence to complement a U.N. monitoring mechanism for the strait. Stronger coordination with Europe and the Gulf could unlock the full set of incentives needed to finalize a comprehensive nuclear deal down the road. However, in the absence of coordination, we could instead see a proliferation of competing middle-power initiatives aimed at shaping Iran’s behavior. At best, this would create strategic incoherence. It would allow Iran to shop around for the best deal while sowing discord among the United States and its partners.
Some supporters of the Iran war may see the adoption of such a plan—with small, achievable goals—as defeat. Trump should not see it that way. By ending the war, he would avoid the trap that snared the United States in Vietnam, Iraq, and Afghanistan. He can secure real economic relief and strengthen U.S. partners while leaving the door open to bigger arrangements down the road. And perhaps most Trumpian of all, he can point to a case where conventional wisdom led policy astray and claim credit for having the nerve to reverse course when others wouldn’t. Trump, being Trump, would have no trouble selling this idea to the American public.
That is what ending the war requires: not an admission of defeat but a claim to victory on different terms from the ones Trump set for himself at the outset. The war was never going to end with Iran’s unconditional surrender. Pretending otherwise only extends the fighting and shrinks U.S. leverage with each passing week. A deal that reopens Hormuz, avoids further harm to U.S. allies, and retains the freeze on Iran’s nuclear program is the version of victory that is available.
