Are We Verging on Another Escalation in the Middle East? | Ali Vaez

Ali Vaez · International Crisis Group

US blockade and sanctions are working, so Iran is more accommodating and talks are stalled ahead of the midterms.

Iran offered a condensed seven-day timeline to reopen Hormuz, down from the 30 days in the June memorandum, hoping to win a deal before the midterms through lower energy prices. Vaez doubted it would work. Washington has added a naval blockade, something close to an air blockade, and much tougher enforcement of existing sanctions, and it is optimistic that this will bring Iran to heel. Trump also wants a nuclear concession that Tehran fears would signal weakness. Vaez concludes the pressure is working, which is why Iran has grown more accommodating and why the two sides are deadlocked. That raises the risk of an October surprise: Iran escalating to break the blockade, or the US escalating for a pre-midterm win or just after the midterms.

“That pressure is working, and that's why Iranian position has become more accommodating of US demand, and that's why we're in a stalemate.”at 11:04

Ali Vaez · International Crisis Group

The war made Iran's leadership more decisive and rallied the regime's base, redirecting public anger outward.

Before the war, Vaez's interlocutors saw Iran as a dead-end system waiting for Khamenei's death. Surveys showed 70-80% of Iranians wanted fundamental change, and a January protest was brutally crushed. The war removed several layers of top political and military leadership and replaced them with new figures. That made the system more efficient at bold decisions than it was under an 86-year-old supreme leader. The anger once aimed at the regime is now shared with the US and Israel. Trump's 'civilizational erasure' rhetoric, which seemed to target the nation state, validated the regime's narrative and mobilized its base in public squares for almost eight months. Hopes for outside help or an exile opposition have been dashed.

“it basically made the system much more efficient in making bold decisions in a way that it wasn't under an 86 year old supreme leader who was set in his ways.”at 21:49

Ali Vaez · International Crisis Group

Iran's economy is in crisis: inflation above 100%, the currency down 50%, and millions of jobs lost.

Iran's economy was already dire before the war and is now far worse. Inflation is above 100%. Unemployment, already chronic, has risen because infrastructure damage has pushed millions out of work. One example is a steel plant that was targeted, and its downstream industrial output was lost too. The currency has lost 50% of its value since the war began. The regime passes this pressure on to the population as long as it can protect the institutions it needs to survive, including the security forces.

“Inflation is above 100%. ... Currency has lost 50% of its value since the beginning of the war.”at 24:03

Ali Vaez · International Crisis Group

Iran's control of the Strait of Hormuz lets it squeeze the global economy, a leverage new in wartime history.

Iran did not physically blockade the strait. For the first two months it allowed selective passage and exported its own oil to China. It used selective attacks to scare off other shipping and drive up insurance premiums, and it later kept hitting tankers beyond the strait in the Persian Gulf and Sea of Oman. Past US wars cost Washington in lives and money but could not hit the pocketbooks of ordinary consumers in Europe, Australia or the Global South at the gas pump. Iran is the first state under great-power economic coercion able to squeeze the global economy in response. Vaez argues that observers underestimated what a Hormuz shutdown would mean.

“This is the first time that a country that is subject to economic coercion by great powers is able to squeeze the global economy in response.”at 27:09

Ali Vaez · International Crisis Group

Israel has been sidelined and US-Israeli coordination has broken down since the April ceasefire.

The war began as a joint US-Israeli operation, but coordination is now much weaker. Vaez links this partly to Netanyahu overpromising and underdelivering. Public reporting says he predicted the regime would collapse within days, and that led Trump to dismiss the risk of Iran closing Hormuz. That created a trust deficit in Israeli assessments, which he cites as a reason Israel was sidelined after the April ceasefire. He also points to the cost to Israel of Iranian attacks: about 6 million Israelis have to shelter during attacks, whereas most Iranians barely felt the war. Iran has not fired on Israel since April, despite several rounds of tit-for-tat with the US. He sees this as US disappointment with what Israel sold as a slam dunk.

“This is a war that Israel and The United States started together, but now Israel is completely sidelined.”at 35:17

Ali Vaez · International Crisis Group

Iran avoids reopening a front against Israel and prefers calibrated escalation with the US, which it sees as more predictable.

Israel has been striking Iranian steel and petrochemical companies and other sources of the Islamic Republic's wealth, which gives Tehran a reason not to open a second front against Israel. Iran would retaliate if attacked, but it prefers to keep the conflict focused on the US, which it sees as more rule-bound than Israel, and to keep calibrating escalation with Washington rather than bringing in an actor it regards as unpredictable and not bound by rule books.

“they would prefer the continuation of the situation in which they're not opening too many fronts at the same time, they're more focused on some calibrated escalation with The United States”at 39:46

Ali Vaez · International Crisis Group

Iran is making the conflict costly for the US and the world so Israel-style strikes never recur against it.

Iran is pursuing a 'never again' strategy after watching Lebanon, Gaza and Syria, where Israel claims freedom of action to strike whenever it wants. By making the war costly for the US and the global economy, including the largest oil shock the world has seen, Iran aims to ensure it is not treated the way those adversaries were. Israel's 'mowing the lawn' approach of periodic strikes to stop an adversary rebuilding its capabilities therefore cannot be applied to Iran.

“The Iranians are making this conflict so costly for The United States and for the entire world so they would never happen again. This is their never again moment”at 43:16

Ali Vaez · International Crisis Group

Houthi escalation in the Red Sea suits Iran by keeping energy prices high and bypassing Hormuz.

The Houthis were unhappy with the Saudi blockade of their ports and airports and used the Iran war as a pretext for escalation. Their pressure on the Red Sea, especially Bab el-Mandeb, which carried about 5 million barrels of Saudi oil exports to Asian markets, benefits Iran. Iran wants energy prices to stay high or rise further. Iraqi allies have also been mobilized to fire on the East-West pipeline, which carries roughly 3 to 5 million barrels a day from the Saudi eastern province to Yanbu on the Red Sea, letting Saudi crude bypass the Strait of Hormuz that Iran controls. Vaez notes the Houthis are not a pure Iranian proxy and sometimes overextend, but the timing works for Tehran.

“But again, the timing of Houthis escalation worked pretty well for the Iranians because this is a period that Iran is trying to make sure that energy prices would remain high, if not go higher.”at 18:07

Ali Vaez · International Crisis Group

Iran's Hormuz pressure has caused the biggest oil shock the world has ever experienced.

Ali cites the oil shock as one of the main costs the war has imposed on the world. He puts it alongside record US Treasury yields, Australia having to issue debt in its own currency, and many countries running low on strategic energy reserves. Together these show how Iran has made the conflict expensive for the global economy, which is the mechanism he says Tehran is using to deter a repeat of Israeli-style strikes.

“the fact that this is the biggest oil shock the world has ever experienced”at 43:30

Ali Vaez · International Crisis Group

US interceptor stocks are heavily depleted, and replacing them will take years, not months.

The Pentagon does not publish magazine depth, so Vaez relies on expert estimates that compare production with the number of missiles fired and shot down. His estimates put about 70% of THAAD interceptors, about 50% of Patriot interceptors and about 75% of long-range US ballistic missiles depleted. Those missiles were also used to defend Israel and the Gulf states, and some assets were moved from East Asia. Production is slow, so replacement takes a few years. He flags the near-term risk that the US would be unprepared for another crisis, and he expects the US to adapt over time with cheaper, Ukrainian-style or Shahed-like systems rather than $100,000 interceptors against $5,000 drones. He also argues Russia and China gain from this depletion because it drains munitions that could otherwise go to Ukraine and Taiwan.

“about 70% of THAAD missiles have been depleted and around 50% of Patriot missiles, and about 75% of long range US ballistic missiles have been depleted.”at 30:48

Ali Vaez · International Crisis Group

Many US Middle East bases were hit and are not worth rebuilding, so the US has been pushed out of the region.

About 17 US bases in the Gulf, Iraq and Syria were targeted. Some are completely inoperative and would need heavy investment to restore. The bases did not deter Iran and instead drew attacks on the host states, mainly the Gulf states, which remain exposed to the same Iranian technology. Vaez argues it makes little sense to rebuild them. After a September Iranian preemptive strike in Jordan killed several Americans, the US has had to pull assets back toward Israel, which has become a large depot of US military assets. He reads this as evidence that a third-rate military could push a superpower out of the region.

“We have about 17 US bases that were targeted. Some of them are completely inoperative and would require significant investment to get them back up and running.”at 32:31