The Iran Crisis Is a Ratchet, Not a Loop

On June 19, Trump signed a peace deal at Versailles. On July 3, the Strait of Hormuz reopened and Brent fell to $72. On July 25, the US paused its bombing campaign after 13 days — advisers warned the military was running out of targets and depleting its arsenal. On August 6, Iran and Oman announced a partial reopening, Brent briefly dipped below $80, and within hours Tehran clarified the strait was not actually reopening. Each of these moments was presented as resolution. None of them lasted three weeks. ^[1][2][3][4] But the cycle is not a loop. It is a ratchet. Each collapse leaves behind structural changes that do not reverse when the next deal is announced — supply chains rebuilt, alliances formalized, and a class of private actors who have discovered that disruption pays better than stability. ECB Chief Economist Philip Lane identified the mechanism in May, before most of these iterations had played out.

Even if the initial energy shock starts to reverse, the second round (effects) will be with us for a while. — Laney Stewart

The war, Lane explained, has forced governments and businesses to permanently reposition their energy supply chains, creating structural pressures that outlast any individual deal. ^[5] That is the click of the ratchet. A strait closes, a buyer finds a new supplier, and when the strait reopens the old route no longer looks essential — or safe. The evidence has accumulated across all six months of the conflict. India, cut off from Middle Eastern LPG by the Hormuz blockade, has pledged to source 25% of its imports from the United States by 2027, part of a $10-to-25-billion increase in American energy purchases. ^[6] European allies, facing what IEA head Fatih Birol calls the largest energy crisis in history — 14 million barrels a day lost, exceeding the 1973 and 1979 oil crises combined — are now willing to pay higher costs for secure Canadian liquefied natural gas. ^[7] Russia and Iran activated a 20-year Comprehensive Strategic Partnership Treaty in October 2025, covering defense, energy, finance, and technology, with Rosatom building eight small nuclear plants in Iran and Moscow blocking UN snapback sanctions. ^[8] These are not temporary hedges. They are capital-intensive, multi-year commitments that do not unwind when Brent dips. Then there are the traders. Glencore's energy trading EBIT jumped 66-fold to $2.66 billion. Shell's quarterly net profit doubled to $9.84 billion. Venture Global's average liquefaction fee rose 69%, from $3.82 to $6.45 per million Btu, as US LNG exports hit record highs after Iranian strikes crippled Qatar's Ras Laffan hub. ^[9][10] The windfalls came not from rising demand but from the gaps that disruption opens in crude, LNG, and shipping markets. ^[9] Analyst Fereidun Fesharaki saw the ratchet in real time. When Hormuz briefly reopened in July, he warned the peace was temporary.

There will be more conflict, there will be more trouble, this is not the end of the story. This is the beginning of the story. — Fereidun Fesharaki

He was right within weeks. By July 7, Trump had declared the deal dead, ordered new military strikes and sanctions, and opened a Department of Justice price-gouging probe into the oil companies. ^[11] By early August, he was negotiating again. That probe points to the domestic fault line the ratchet has opened. Trump is simultaneously bombing Iran and investigating the American oil companies whose profits have surged on the disruption. ExxonMobil and Chevron reported a combined $27 billion in quarterly earnings. Gasoline averages $4.08 a gallon. Sixty-nine percent of Americans now view the economy as poor, and 66% disapprove of the president's job performance. ^[12][13][14] The states that initiated this conflict are bearing its costs. The private actors who intermediate it are capturing its gains. The IEA has offered the counter-narrative: a 2027 oil glut of 5 million barrels a day, with supply surging to 110.3 million barrels daily and Brent dropping toward $78 — if the US-Iran peace deal held. ^[15] The economics are sound. The politics are not. A durable deal is precisely what the ratchet prevents, because each collapse reinforces the incentives that make the next one more likely. Traders who booked record profits on price dislocations have no reason to want stability. Exporters who locked in new customers at higher margins have no reason to want the old routes back. And a president who keeps promising resolution in 48 hours keeps starting each negotiation from a weaker position than the last. The cycle does not need anyone to want it. It only needs the people who could stop it to have no reason to try.