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Welcome to The Geopolity’s What We’re Watching (3W), our daily look at the interconnected worlds of Geopolitics, Economics and Energy. Curated from the world’s leading sources of information, our analysis and commentary is designed to help you make sense of the events driving the major developments in the world.
The New York Times writes that Iran has learned so quickly during the most recent war, that it now has the ability to penetrate US air defenses even when these are not starved of interceptor missiles. In addition, NYT says, US inventories of interceptor missiles are running critically low. The Pentagon has used more than 1,500 Patriot interceptor missiles in the war and has fewer than 1,700 interceptors left. The US produced about 600 interceptors in all of 2025. The result is that US military bases across the Middle East are totally exposed to Iranian attacks, as they were designed based on the idea that the US would always have total air superiority – unlike Iran’s military bases which have been built deep underground, scattered, to be able to withstand aerial attacks. The conclusion from all this is that US does not have the ability to inflict a military defeat upon Iran, and that any attempt to nevertheless do so will have a devastating cost for US interests in the region, as well as US allies.
In an interview with Axios, US president Trump provided further indications that the US has realized it is “stuck” when it comes to Iran. Trump said the US would for now focus on watching Iran’s economy crumble, as opposed to ordering a new military offensive. He stressed that Iran “is in very bad shape” economically and has no money to pay its troops. The US naval blockade has exacerbated the Iranian regime’s economic crisis, Trump said. “It will work out. It always works out. It’s like a chess game,” Trump said of the back-and-forth with Iran.
Trump also told reporters on Tuesday that the War on Iran was going “fine” and that the US has “total control” of the Strait of Hormuz, writes Bloomberg. “Right now, we’re in a very good position,” he said.
On Tuesday 3W explained why the situation is not a rosy as Trump makes it out to be. But if one wishes to extricate ones’ self from a conflict, the narrative “we are winning and we don’t have to anything” is useful.
The Associated Press notes the clear contradiction in this new US position. Trump used to say that he started his war with Iran after 50 years of economic pressure had failed to stop its nuclear weapons ambitions — but he’s now betting that a continuation of these sanctions, coupled with a naval blockade, can bring an end to that war. Indeed, we at 3W would say, this does not make any sense. And it makes further clear the US is stuck and looking for a face-saving way out.
The negotiating table is unlikely to provide the US the face-saving way out, the US and Iran are not coming closer together at all. On top of what was agreed as part of the MOU, Iran now also demands reparation payments from the US. In response, US president Trump is now demanding “compensation from Iran, for all of the people that they have killed and gravely wounded with their roadside bombs and many conflicts”, writes The Associated Press. “I have instructed my representatives to put this firmly into any, and all, future negotiations,” Trump said. The issue 3W sees with this somewhat childish behaviour is that the end result of it all is that Strait of Hormuz will remain closed.
Nevertheless, Pakistan’s defense minister says the US and Iran are “close to some sort of arrangement” over the Strait of Hormuz, writes Bloomberg. “Things are shaping up in favor of peace,” Khawaja Asif told reporters in Islamabad on Tuesday, but without providing details.
The financial markets appear not to convinced by the narrative that “all is going well and a deal is near”. As a result, oil prices are on the rise again. On Tuesday, Brent oil reached $90 a barrel for the first time in two weeks, writes The New York Times. West Texas Intermediate was up 1.8 percent to a little over $83 a barrel.
The US Energy Information Administration (EIA) now anticipates oil disruptions from the War on Iran to reach 600,000 barrels per day until the end of next year, writes The National. New figures from the EIA estimate production shut-ins in the region averaged 5.5 million bpd last month. The EIA said its latest analysis assumes oil flows will slowly increase in September, prompting it to raise its forecast of blocked production in August. It does not assume recent blockade threats in the Bab Al Mandeb strait have resulted in more blocked supply. “If these assumptions hold, we expect it will take until early 2027 for production and trade patterns to generally return to pre-conflict status,” the agency said.
Anwar Gargash, the primary diplomatic adviser to the ruling family in the UAE, has warned that the Arabian Gulf region cannot remain in its current state of “neither war nor peace” indefinitely, writes The National.