The US–Iran Stalemate and the Rise of a Global Polycrisis

• The US–Iran stalemate is unlikely to hold. Absent meaningful negotiations, renewed escalation is likely to occur, and fighting will likely break out with limited warning.

• Disruption in the Strait of Hormuz will continue to act as a global economic shock driver, creating volatility in energy, shipping, and insurance markets, with cascading effects on supply chains and food security.

• The conflict has evolved into a systemic risk, not a regional one. Its effects are reinforcing a broader global polycrisis, amplifying economic instability and geopolitical fragmentation.

• Iran retains escalation leverage and is signaling a willingness to use it. Tehran is positioned to impose asymmetric costs across the region, particularly targeting energy infrastructure and maritime routes.

• Global coordination will continue to erode. Diverging responses will weaken collective economic pressure and accelerate fragmentation of trade and financial systems. 

The US and Iran are now locked in a stalemate that is inherently unstable, with recent US moves to escort commercial shipping and Iran’s public threats of retaliation underscoring how quickly the confrontation could escalate. Washington’s strategy of economic pressure and maritime security measures has not produced meaningful concessions from Tehran, which continues to refuse to return to the negotiating table on US terms.

US decision-makers are facing a narrowing set of options. These reportedly range from a limited but intense strike campaign to efforts to secure parts of the Strait of Hormuz, to more targeted operations against Iran’s nuclear program. None of these options guarantee a decisive outcome, and all carry serious escalation risks.

At the same time, Iran has demonstrated that it can absorb US and Israeli pressure while still imposing costs on the global system. Tehran previously endured maximum economic sanctions during the first Trump administration. Currently, Iran is working with Afghanistan, Pakistan, and other neighboring states to sustain oil exports. While these volumes are limited, they underscore Iran’s ability to adjust in real time.

At the core of the US dilemma is President Donald Trump’s credibility. Any agreement that appears weaker than the 2015 nuclear deal reached under former President Barack Obama, which Trump withdrew from in 2018, carries significant political risk at home. The alternative is military escalation, a path that risks triggering a broader regional conflict with global consequences. 

Tehran is approaching the crisis with patience, sequencing, and a focus on shaping the environment over time. Iran’s strategy has centered on absorbing pressure while steadily increasing the costs of the status quo for the US and Israel.

Rather than rushing toward a resolution, Iran is working to make the current environment progressively more expensive and unstable, using maritime pressure, proxy activity, and calibrated escalation to build pressure on Washington. Meanwhile, Tehran’s proposed framework for a negotiated settlement—ending the conflict, freezing enrichment for 15 years, and launching regional security talks—suggests some diplomatic flexibility although less than that desire by the US. However, its approach is carefully structured to preserve what Iran sees as non-negotiable: its missile program and support to proxies, such as Lebanese Hizballah, Iraqi Shi’a militias, and the al-Houthis in Yemen.

While Iran is offering its version of a negotiated settlement, it is also signaling a clear willingness to escalate, including through explicit warnings that it could target high-value economic nodes such as the UAE in the event of renewed confrontation.  

A defining feature of the current crisis is Iran’s growing confidence. While claims of universal public support are almost certainly overstated, there is visible national mobilization and internal cohesion that have reduced domestic pressure on Iran’s leadership. Despite the removal of senior Iranian officials, the leadership structure remains intact and functional, with decision-making continuity suggesting the potential for a more hardline posture rather than fragmentation. 

This confrontation is no longer limited to military or diplomatic maneuvering—it is now a direct driver of broader global instability. Even limited disruptions have pushed oil prices upward, increasing costs across transportation and industrial production and feeding directly into food systems where rising fuel and fertilizer costs are worsening already fragile conditions in lower-income countries. An estimated 45 million people in lower-income countries could face severe hunger and famine conditions.

As the disruption in the Strait of Hormuz persists and the global economy absorbs the shock, geopolitical fragmentation is becoming more pronounced. On May 1, China’s Ministry of Commerce instructed five domestic refineries to ignore US sanctions targeting Iranian oil exports. This marks a notable shift, as Beijing has historically shown a degree of compliance with US sanctions. However, the sustained disruption to Iranian exports and instability in Hormuz pose direct risks to China’s energy security and its ability to sustain economic growth. Therefore, China’s resistance to US sanctions on Iranian oil, combined with the emergence of alternative trade routes and energy corridors, points to a more divided global economic landscape. 

The current situation is unlikely to stabilize in the near-term. Neither Washington nor Tehran appears willing to concede on core issues, and both retain the capability—and increasing incentive—to escalate. There is still a narrow path for diplomacy, most likely in the form of a phased agreement focused on stabilizing the Strait of Hormuz and easing immediate economic pressure. However, any such deal would likely be temporary and transactional rather than a long-term solution—at least as far as the current conditions are concerned. If negotiations fail to gain traction, escalation becomes increasingly likely, with Iran favoring rapid and asymmetric responses focused on targets that generate maximum economic and strategic impact. 

Energy disruption will remain the central pressure point shaping the trajectory of the ongoing crisis. Even limited instability in the Strait of Hormuz will continue to drive oil price instability, raise shipping and insurance costs, and place sustained strain on global supply chains. These pressures will continue to feed into broader economic instability, including rising costs tied to food production and transportation. Multinational firms should plan to operate within sustained disruption rather than wait for stabilization, as volatility in energy, supply chains, and security conditions are likely to intensify in the coming weeks and months.

At the regional level, Gulf states, particularly the UAE, will remain exposed to persistent security risks. Missile, drone, and other asymmetric threats will continue to pose challenges to aviation, ports, and overall business continuity. Any renewed escalation is likely to focus on high-impact economic infrastructure, including energy facilities, desalination plants, and logistics hubs, as Iran seeks to convert military pressure into tangible economic disruption.

Globally, the crisis is accelerating fragmentation. Diverging responses from major powers, especially China’s stance on sanctions, will continue to weaken coordinated economic pressure and contribute to the emergence of parallel trade and financial systems. This shift will make it increasingly difficult to contain the crisis through traditional policy tools. With limited trust between the US, Iran, and Israel coupled with a heavy reliance on coercive measures, any military action is likely to trigger rapid and potentially disproportionate responses, compressing decision-making timelines and increasing the risk of miscalculation.

Taken together, the US–Israel-Iran confrontation is no longer a contained regional issue; it is a systemic driver of the broader global polycrisis. Unless diplomacy resumes in a meaningful way, force will increasingly become the default mechanism for breaking the stalemate, raising the likelihood of renewed conflict and its cascading global effects. 

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