The Leverage Trap

On July 19, a formal peace accord between the United States and Iran was scheduled to be signed in Switzerland. The framework had been set: a 60-day memorandum of understanding brokered in Islamabad, a partial US withdrawal of aircraft from Ben Gurion Airport under the agreement, and a date certain for the final document ^[1]. Instead, on that day, Iran expanded its missile and drone strikes to four additional countries — Jordan, the United Arab Emirates, Qatar, and Oman — joining Kuwait and Bahrain, which had been hit days earlier ^[2]. The war that was supposed to end on July 19 had just become regional. The contradiction was not an accident. It was the logical endpoint of a strategy that had been coherent by its own terms. By late June, US intelligence had concluded that both nations now treat diplomacy as a tool for leverage within a broader strategic rivalry ^[3]. Iran had been explicit about the method: as early as June 2, Iranian authorities ceased communication with mediators to pressure the United States and Israel into a ceasefire in Lebanon ^[4]. The military campaign and the diplomatic track were not alternatives. They were the same instrument, applied at different pressures. The calibration was deliberate. Iran's strikes avoided direct hits on US naval assets, designed to minimize the risk of an overwhelming American military response ^[2]. The IRGC built covert cells in Iraq — small, tightly controlled units of elite Shiite fighters — to launch drones at Gulf states hosting US forces while maintaining plausible deniability ^[5]. Iran developed independent targeting capabilities using SS7 protocol vulnerabilities and commercial advertising databases to track US personnel in real time, enabling strikes on hotels housing American troops in Iraq and Bahrain ^[6]. This was not a regime lashing out. It was a state applying calibrated pressure across a widening map. The campaign was having its intended material effect. Shipping through the Strait of Hormuz collapsed to 1.27% of pre-conflict averages, with LNG and very large crude carriers entirely absent for consecutive days. War risk insurance premiums surged from 0.15% to 5% of hull value ^[7]. IEA Director Fatih Birol described the situation in stark terms.

Oil security is still a critical issue. — Fatih Birol

Iran declared that oil and gas exports would cease until the end of America's evils and threatened to activate Houthi allies to close the Bab al-Mandeb Strait, opening a second maritime chokepoint ^[7]. By late July, the Houthis had announced a new Red Sea blockade and begun attacking Saudi tankers enforcing an embargo on ships docking at Saudi ports ^[8][9]. The dual-chokepoint strategy was operational. And for a time, there were signs the pressure was translating into diplomatic leverage. Gulf states hosting US bases, skeptical of long-term American security commitments, were reported to be weighing a return to diplomatic negotiation and appeasement to maintain stability ^[2]. The logic of the strategy — make the war too costly for America's regional partners, and they will press Washington to negotiate — appeared to have a path. Then the path closed. On July 8, Trump declared the Islamabad memorandum over ^[10]. The next day, the IRGC struck US bases in Kuwait and Bahrain and issued an explicit warning ^[11].

The Islamic Revolution Guards Corps warns the child-killing US military that, should its aggression be repeated, our crushing responses will be expanded to other American bases in the region. — Islamic Revolution Guards Corps

By July 19, the date the Swiss accord was supposed to be signed, Iran had made good on that threat. The target set now included civilian infrastructure: airports, desalination plants, and an Amazon data center in Bahrain ^[12]. The IRGC explained its reasoning.

Iranian military forces targeted and destroyed a building belonging to the American company Amazon’s data center in Bahrain, which serves a critical function in gathering intelligence for the U.S. armed forces. — Islamic Revolutionary Guards Corps Research and Self-Sufficiency Jihad Organization

The saturation had succeeded tactically. The war was now genuinely regional, fought across six countries. But it had produced the opposite of its strategic intent. The military stick was supposed to fracture the US-Gulf basing architecture. Instead, it unified the Gulf states against Tehran. Iran's strikes hit sovereign infrastructure directly: a Kuwait Oil Company offshore drilling rig, Kuwait's consulate in Basra, Emirati oil tankers ^[13]. Kuwait characterized the campaign in stark terms and asserted its right to respond under international law.

The Ministry of Foreign Affairs expresses the State of Kuwait's strongest condemnation and denunciation of the ongoing attacks targeting the Consulate General of the State of Kuwait in the city of Basra, in an unacceptable violation of the inviolability of the consulate and an undermining of the Iraqi government's efforts to fulfill its international obligations as stipulated under the Vienna Convention on Consular Relations (1963), particularly Article (31), which obliges the host state to take all appropriate measures to ensure the complete protection of the premises of consular posts and to preserve their inviolability. — Ministry of Foreign Affairs of Kuwait

Bahrain, Saudi Arabia, and Qatar coordinated their response — not to pressure Washington to leave, but to condemn Iran for violations of international law and UN Security Council Resolution 2817 ^[14]. Oman, the traditional mediator in US-Iran relations, condemned the attacks and called for increased diplomatic efforts and negotiations — an appeal for de-escalation directed at Tehran, not a demand that Washington constrain its campaign ^[15]. Not a single Gulf state asked the United States to withdraw its forces or close its bases. The diplomatic track was supposed to produce a deal. Instead, Iran's escalation gave Trump the pretext to abandon it entirely. On June 1, Trump had been open to a written agreement.

If we can get something down in writing which will accomplish the same thing without killing everybody, I’d like to do that. — Donald Trump

By July 23, he had reversed.

They haven’t received enough pain yet. — Donald Trump

I don't want to deal with them anymore. — Donald Trump

The administration is now considering regime change as a war aim — a dramatic escalation from the original objective of degrading Iran's nuclear program ^[16]. On June 26, Trump had warned that if Iranian aggression continued, the Islamic Republic of Iran would no longer exist ^[17]. The saturation campaign that was supposed to force a diplomatic ceiling had instead removed the diplomatic floor. The Hormuz blockade was supposed to generate economic pressure on the United States and its allies to negotiate. Instead, it generated a 15-nation European military coalition, led by France and the United Kingdom, to clear naval mines and escort commercial vessels through the strait ^[18]. Macron and Starmer had affirmed the June 17 MOU as an important step forward for regional stability, particularly by reaffirming freedom of navigation ^[19]. When Iran closed the strait rather than sign the accord, Europe responded with warships, not diplomatic pressure on Washington. And all of this is being sustained by a state in internal freefall. Inflation is running near 90%, with food inflation at 134%. The rial has collapsed to over 1.7 million per dollar. More than a million jobs have been lost. An 88-day internet blackout has severed the country from global communications ^[4]. Water shortages and electricity blackouts are chronic ^[20]. President Pezeshkian addressed the nation directly.

We are fighting and we must accept this hardship. — Masoud Pezeshkian

On July 21, Pezeshkian declared Iran was in a full-scale war that extended well beyond missile strikes to target the economy and public livelihood as the most important battlefront ^[21]. His foreign minister, Abbas Araghchi, was simultaneously coordinating with European ambassadors to find new mediators for a peace deal ^[21]. The dual track had not been abandoned. It had simply stopped working on either end. Russia, whose support to Iran had been transactional in earlier phases of the war, is conspicuously absent from the saturation campaign ^[22]. Iran is running the most expansive military operation in its modern history alone, from a position of economic collapse, against a coalition that its own strikes have unified. The strategy was rational. Convert Iran's last remaining military capability — its missile and drone arsenal, its proxy networks, its geographic position astride the world's most critical energy chokepoint — into leverage that would force Washington to the table on terms Tehran could accept. The saturation was the stick; the Islamabad MOU was the intended outcome. But the stick broke the table. Iran is now fighting a regional war alone, from an economy with 88% inflation, while the Gulf states it struck have unified against it and the American president it sought to constrain is weighing the end of its regime. The saturation that was meant to build a ceiling has removed the floor.