Two Months In, Everyone Is Running Out of Time

For the first time since the war kicked off in February, there is finally some indication of where it might all end up. Iran has reportedly put a new proposal on the table: it will reopen the Strait of Hormuz if the United States lifts its blockade, with the nuclear question shelved for a later round. Minor details, as it were.

That Tehran is now asking to separate the economic question from the nuclear one is quite telling. Were the regime truly committed to its old plan of waiting out the Americans and hoping Trump gets bored, it would be unlikely to be floating proposals like this. The war, in other words, may have shaken Tehran more than it has let on.

Yet Iran is not the only party running out of time and maneuver space. As the economic shockwaves ripple out from Hormuz, Washington also finds itself in an increasingly difficult position. Lebanon is locked in its own life-or-death diplomatic dance, and in Israel the political bill for two and a half years of fighting is coming due. The question now binding all of them together is a simple one: who will crack first?

Key Takeaways

Iran has floated a proposal, through Pakistani mediators, to reopen the Strait of Hormuz in exchange for the United States lifting its port blockade, deliberately bypassing the nuclear enrichment question for a later stage.
The US blockade is estimated to be costing Iran roughly $435 million per day in lost exports and blocked imports, with analysts warning Tehran is about two weeks from filling its oil storage and having to shut down wells.
Lebanon has entered direct, ambassador-level talks with Israel and extended its ceasefire by three weeks, but the two sides remain far apart on Israeli withdrawal and the disarmament of Hezbollah.
Phase 2 of Hezbollah disarmament, north of the Litani River, is the harder problem: the group has explicitly said it will refuse to cooperate, raising the specter of renewed civil war along sectarian lines.
In Israel, “strategic fatigue” is fracturing Netanyahu’s coalition, with opposition figures merging parties, a Haredi conscription ruling straining his government, and a manpower shortage in the IDF.

Operation Economic Fury

Washington and Tehran were originally slated to sit down for a fresh round of talks over the weekend, with Steve Witkoff and Jared Kushner representing the United States and Abbas Araghchi representing Iran. Araghchi did land in Islamabad on Friday, but he refused to meet any of his American counterparts once he arrived. His rationale was that the continued US blockade on Iranian ports made negotiations a non-starter, and that until it was lifted, there was simply nothing to discuss.

The United States refused to lift the blockade, and Trump proceeded to cancel Kushner and Witkoff’s departure entirely. By Sunday, Araghchi himself was on a plane out of Pakistan, headed to Oman. Trump told reporters that “we have all the cards” and that the US was “not going to spend 15 hours in airplanes all the time going back and forth to be given a document that was not good enough.”

A president claiming a dramatic upper hand is nothing new. But the latter part of that remark represents a genuine shift in posture, and one that could prove telling about the war’s direction.

For several weeks, it had appeared that it was Trump who was looking for an early exit from the campaign, a reading that was heard loud and clear in Tehran, which believed this handed it an advantage. From the outset, Tehran’s view was that the Americans and Israelis would be unwilling to commit to a full boots-on-the-ground campaign, and that an air campaign alone would not be sufficient to bring down the regime. As hot takes go, it has aged well.

Washington now appears to be betting that it is America that holds the stronger position, since it is no longer conducting daily attacks on the Islamic Republic and can instead sit back and wait Tehran out. Through conventional military means alone, that looks no more feasible than the air campaign did. But rather than pursuing Operation Epic Fury, the administration seems to have shifted to a different instrument entirely: Operation Economic Fury.

The arithmetic of that pivot is brutal. The US blockade of Iranian ports, even accounting for the ships reportedly able to slip through, is estimated to be bleeding Iran somewhere in the neighborhood of $435 million each day in lost exports and blocked imports. Roughly a third of the nation’s overall oil revenue that passed through Hormuz before the war was dedicated specifically to funding the IRGC and paying military salaries.

With oil exports more or less ground to a halt, Iran is quite literally running out of storage for the crude it does have. Analysts put the figure at roughly two weeks before storage is completely filled and wells have to start shutting down.

Bessent’s Financial Kinetics

Watch on WarFronts

Watch the full video analysis on the WarFronts YouTube channel, presented by Simon Whistler.

Spearheading the campaign has been Treasury Secretary Scott Bessent, who has described the economic approach as the “financial equivalent of what we saw in kinetic activities.” True to his word, the United States has steadily ramped up pressure that was already intense to begin with.

On April 15th, the Treasury sanctioned the Shamkhani oil network, a multi-billion-dollar smuggling operation run through Emirati-based front companies that had been moving Iranian crude. The following week brought more sanctions against Hengali Petrochemical Refiner, one of China’s largest and Iran’s top remaining oil customers, along with 40 additional shipping firms and the freezing of roughly $344 million in Iran-linked cryptocurrency.

This would be difficult for any country to absorb, but all the more so given the state of the Iranian economy when the war broke out. By February 27th, the day before the first bombs fell, the rial had already lost roughly 60 percent of its value since the 2025 war with Israel alone, having long since fallen to a fraction of its former worth. For context, one US dollar currently buys around 1.5 million Iranian rials.

The rest of the economy was faring little better. Indeed, economic distress was the trigger for the initial wave of protests that kicked off this whole saga in late December. Food inflation had crossed 100 percent by February, with bread and cereals creeping past 140 percent.

Not all of the damage is externally imposed. Much of it flows from US sanctions and the blockade, but the regime’s hyper-focus on security has produced a complete internet blackout across the country that has now run for eight weeks straight. The direct cost is estimated at between $30 and $40 million a day, with losses from the blackout alone crossing $2 billion since the start of the war.

None of these blows would be crippling in isolation. Stacked together, however, they make the Islamic Republic look a good deal less steady. The Foundation for the Defense of Democracies has placed the cumulative damage since the February strikes at roughly $144 billion. Tehran’s own assessment skews dramatically higher, at $270 billion, though that figure folds in infrastructure damage as part of a self-reported campaign demanding compensation, and is best taken with a grain of salt.

A Possible Breakthrough

Whether the real number lands closer to FDD’s estimate or Tehran’s, this is a genuine economic crisis. That said, none of it means Iran is about to collapse. The regime has spent half a century constructing itself to survive precisely this kind of pressure.

As of late April, that pressure appears to have produced what could be the first diplomatic breakthrough since the war began. Axios reported that Araghchi, working through Pakistani mediators, had floated a proposal to bypass the nuclear question entirely. Tehran is offering to reopen Hormuz in exchange for lifting the blockade, with both sides agreeing to push enrichment talks to a later stage.

It remained unclear whether Washington would accept. But the offer is, perhaps, the first sign that progress might be around the corner after all. And Iran is not the only beleaguered nation in this conflict negotiating for its future. The other is Lebanon.

Negotiations on Another Front

Lebanon has taken an uncharacteristically prominent role throughout much of this war, from Hezbollah opening a second front against Israel in the early days to nearly destroying the ceasefire mere hours after it took effect. Since then, Israel has continued its campaign, largely in the country’s south. Roughly 55 towns and villages south of the Litani River have been forcibly evacuated, with the likes of Bint Jbeil, once the operational heart of Hezbollah’s southern infrastructure, lying in ruins.

Over the last two weeks, though, something genuinely impressive has emerged: the chance that Lebanon may actually come out of this having addressed the decades-old question of what to do about Hezbollah. Beirut never accepted being part of the Iranian-negotiated ceasefire, repeatedly insisting that the country “speaks with one voice, its own.”

What followed would have been politically unthinkable even a year ago: direct, ambassador-level talks between the Lebanese and Israeli governments. The two sides agreed to a three-week extension of their ceasefire last Thursday, buying more time to negotiate the intricacies of what their future relationship might look like.

But as with nearly every negotiation across the Middle East right now, that is where things begin to break down. In this case, the trouble is that the parties have been here before, to a lesser extent, at the end of the 2024 Israeli campaign against Hezbollah, and the results of that effort were, frankly, underwhelming.

The Litani Problem

As part of the 2024 deal, the Lebanese Armed Forces undertook a campaign to disarm Hezbollah in stages, starting south of the Litani River, a longtime stronghold of the group along the border with Israel. In January, the LAF declared this phase, Phase 1, complete. It tiptoed around the question of how thorough the effort had been, describing a state monopoly on arms “in an effective and tangible way” while stopping short of claiming complete disarmament.

Throughout that campaign, the LAF removed roughly 10,000 rockets and 400 missiles. While Hezbollah’s stockpile had been significantly reduced from its pre-war heights, this still represented only a fraction of what was believed to be stashed in the area.

When the March 2026 escalation broke out, even that thin progress largely collapsed. LAF Commander Rodolphe Haykal reportedly refused to deploy his forces against Hezbollah while Israel’s offensive was active, ceding territory without a fight to the group and handing Jerusalem more reason to roll into the south. Tom Barrack, the American envoy to Syria, told Lebanese officials, publicly, to “stop with the bullshit.”

There has, nonetheless, been real political progress in Beirut. The country had gone without a president for over two years because of Hezbollah’s gridlock, and operated with a caretaker prime minister throughout the entirety of the 2024 war. That world no longer exists. Hezbollah ceded ground to allow the election of a president, and along with new Prime Minister Nawaf Salam, the country has shown unprecedented commitment to reclaiming its sovereignty.

But the legacy of successive Lebanese governments that were unable or unwilling, or both, to confront Hezbollah is precisely what allowed the group’s buildup of munitions in the first place. Israeli negotiators are not particularly trusting that the LAF has changed enough to deliver.

Sovereignty Against Security

The two sides are negotiating from opposite ends of the same problem. Israeli Defense Minister Katz has called for a four-tier defensive perimeter in the south of Lebanon, explicitly citing the Rafah and Beit Hanoun model for how to secure a hostile border.

Lebanon’s position begins from the reverse premise. Prime Minister Salam has been clear that any deal requires a full Israeli withdrawal. Beirut’s entire pitch, the very reason any Lebanese leader can sell domestic engagement with Israel at all, rests on sovereignty. A framework that results in the Lebanese government ceding land to a country it is still technically at war with is hardly a ringing endorsement of a sovereignist government.

Even if that gap could somehow be bridged, the harder problem waits on the other side. Phase 2 of the disarmament plan, the stretch north of the Litani, is where Hezbollah has explicitly said it will refuse to cooperate. The group reads the November 2024 ceasefire as applying exclusively south of the Litani, and its posture toward Phase 1 amounted, at best, to passive non-interference. That tolerance ends at the river.

Lebanese security analysts have been blunt: any LAF attempt to disarm Hezbollah north of the Litani would be met with violent resistance, both from the group itself and potentially in the form of a country dragged once again into civil war along sectarian lines. Hezbollah retains relatively widespread support among Lebanon’s Shia base.

While all of this plays out in the negotiating rooms, the situation on the ground is grim. More than a million people, over 20 percent of the country’s population, have been displaced from their homes. Israel destroyed the main bridges across the Litani, effectively stranding residents who had evacuated north from returning home, and Katz has explicitly said they will not be allowed to do so until Israel is satisfied its security concerns have been met.

The evacuation orders in the south have largely targeted Shia villages, though at least some Christian villages have also been occupied, as a recent viral photo of an Israeli soldier smashing a statue of Jesus with a sledgehammer attests. For over a million displaced Lebanese, whether these negotiations translate into actually going home depends entirely on what concessions each side is willing to make.

Bibi’s Bill Comes Due

Lebanon and Iran are not the only countries where the bill for this war is coming due. Israel has been fighting considerably longer than either the United States or the Gulf states, not two months but two and a half years, since October 7th, 2023. In that span, Israel has fought Iran twice, occupied half of Gaza, deployed across southern Lebanon, reinforced the West Bank, and established a buffer zone in Syria.

Israelis are, to put it mildly, tired of war. And the question they are increasingly starting to ask is what, exactly, all of this fighting has bought.

In the aftermath of the October 7th attack, Prime Minister Benjamin Netanyahu addressed the country and vowed to “change the face of the Middle East.” That was the raison d’etre for launching all of these various fronts, and he repeated it almost word for word just the other day. It has become the defining slogan of his wartime premiership. On the military ledger alone, he has made progress: the damage done to Iran’s Axis of Resistance over the last few years, set against the comparatively minor Israeli damage and casualty rates, was not something many had on their radar.

There are serious criticisms of this approach from around the world, evident in the rise of new parties and factions across Europe and America defined by their opposition to Israel’s conduct in Gaza. Increasingly, though, the criticism is coming from within Israel as well.

Strategic Fatigue and a Cracking Coalition

Opposition figure Yair Lapid put it bluntly the other day, responding to Netanyahu’s speech: “One word is missing, almost. You almost changed the Middle East, and it always turns out in the end that it hasn’t changed. Before October 7, Hamas controlled Gaza and had an army of tens of thousands. Today, Hamas controls Gaza and has an army of tens of thousands. Before October 7, Iran had a supreme leader named Khamenei. Today, Iran has a supreme leader named Khamenei.”

Lapid’s argument carries weight. Chatham House has described the phenomenon as “strategic fatigue”: the public still broadly supports the war’s objectives but has lost faith in the government’s ability to convert military operations into anything resembling a lasting resolution.

That gap is where Netanyahu’s domestic position has begun to crack. On Sunday evening, Lapid stood alongside former prime minister Naftali Bennett on a stage in Herzliya and announced that they had merged their parties into a single list, called “Together,” ahead of the upcoming elections in October.

Netanyahu is in a fragile enough coalition as it is, one reached only after the country endured a staggering five elections in four years, and it too is showing cracks. Last weekend, the Israeli High Court issued a sweeping enforcement ruling on the drafting of Haredi Jews, the so-called ultra-Orthodox, into the military, an obligation they generally view as violating core tenets of their faith. Haredi men have been exempt from conscription since the country’s founding.

That exemption worked when the Haredim were a tiny fraction of the population. But their numbers have exploded over the last two decades, and against the backdrop of a multi-front war and an estimated 17,000-soldier shortage in the IDF, the issue has become a serious fault line in Israeli politics.

The problem for Netanyahu is that his coalition depends on the support of the Shas party, which represents Haredim and has made clear the draft exemption is an issue it will not bend on. Another Haredi party, United Torah Judaism, already quit the coalition last year over precisely this issue, leaving Netanyahu with a minority government.

None of this means Netanyahu is finished. Some version of the end of his political career has been written every time he has faced a crisis at home, and he has always managed to return. One of the opposition’s biggest weaknesses is how little its members agree on once they get past the goal of removing Netanyahu from office, which is exactly what fueled his revival after he briefly lost the premiership in 2021.

Nearly three years on from October 7th, the Middle East carries a lot of new scars. What it does not have, at least not yet, is a real peace deal. The coming week could be the first test of whether one is genuinely possible, or whether the region is destined to collapse back into endless bloodshed.

Presented by

Simon Whistler

Simon Whistler is one of YouTube's most prolific educational creators. WarFronts is his deep dive into military history and conflict analysis.

Frequently Asked Questions

What is Iran’s new proposal, and why does it matter?

Iran, working through Pakistani mediators, has floated a proposal to reopen the Strait of Hormuz in exchange for the United States lifting its blockade on Iranian ports, with both sides agreeing to push nuclear enrichment talks to a later stage. It matters because Tehran’s willingness to separate the economic question from the nuclear one suggests the war has pressured the regime more than it has publicly admitted, and could mark the first diplomatic breakthrough since fighting began in February.

How much is the US blockade costing Iran?

The blockade is estimated to be costing Iran roughly $435 million each day in lost exports and blocked imports. With oil exports nearly halted, analysts estimate Iran is about two weeks from completely filling its storage and being forced to shut down wells. Roughly a third of pre-war oil revenue through Hormuz funded the IRGC and military salaries.

Why are the Lebanon-Israel talks stalled?

The two sides are negotiating from opposite premises. Israel, through Defense Minister Katz, wants a four-tier defensive perimeter in southern Lebanon, modeled on Rafah and Beit Hanoun. Lebanon, through Prime Minister Nawaf Salam, insists any deal requires a full Israeli withdrawal, since the country’s entire sovereignist pitch depends on it. Israeli negotiators also doubt the Lebanese Armed Forces can deliver on disarming Hezbollah.

Why is Phase 2 of Hezbollah disarmament so difficult?

Phase 1, south of the Litani River, removed roughly 10,000 rockets and 400 missiles but was a fraction of the suspected stockpile, and the LAF stopped short of claiming complete disarmament. Phase 2, north of the Litani, is where Hezbollah has explicitly said it will refuse to cooperate. Lebanese security analysts warn that forcing the issue could trigger violent resistance and potentially renewed civil war along sectarian lines.

How is the war straining Netanyahu’s coalition?

On two fronts. Politically, opposition figures Lapid and Naftali Bennett have merged their parties into a single list called “Together” ahead of October elections. Internally, an Israeli High Court ruling on conscripting Haredi men collides with the demands of the Shas party, which props up Netanyahu’s coalition and refuses to bend on the draft exemption. United Torah Judaism already quit over the issue last year, leaving Netanyahu with a minority government amid an estimated 17,000-soldier IDF shortage.