Middle East War: Trump at the Crossroads

Time is not on Trump’s side. Rising oil prices have already seriously hurt Trump’s election prospects. The latest Reuters/YouGov poll shows Trump’s approval rating has fallen sharply to 36%, the lowest since his first term began, matching the level before the 2020 election, when the Republicans were swept, and before the 2024 election, when the Democrats were swept. Polymarket shows the probability that the Republicans will be swept in this year’s midterms has risen to around 50%—and losing the House is all but a sure thing. Every additional day the war continues and every additional day the strait remains blocked increases the crude oil supply-demand gap by tens of millions of barrels. As time goes on, oil prices rise, making Trump’s situation increasingly unfavorable.

At a crossroads, Trump is stuck between going forward and backing down. If he retreats, he still has time to regain support by addressing other issues, but it would also lead to major losses to national interests, disrupt the dollar’s great cycle through channels such as petrodollar arrangements and artificial intelligence investment, and fundamentally rewrite the Middle East’s geopolitical landscape. If he advances, not only does the U.S. military face higher risks of casualties and Trump’s political standing take an even bigger hit, but more importantly it is likely to further escalate the situation, pull more countries into the conflict, and make the war harder to end—dealing bigger blows to global shipping, energy prices, and supply chains.

Even so, Trump still needs to break out of this impasse as quickly as possible. Whether it’s TACO, negotiations, or a landing operation, the next 1–2 weeks will be a critical phase.

TACO could help him get out of the current situation as quickly as possible, but the price is a major loss of personal political reputation and national interests. In the early stage, right after the war broke out, when the Gulf countries were rushing to mediate, Trump calling off the fighting was arguably just doing what was reasonable and in line with the times. Now the Gulf states are growing increasingly wary of Iran and hoping the U.S. will lift the strait blockade and weaken Iran’s capabilities. A direct withdrawal would unquestionably tear apart mutual trust. The status of the petrodollar would be challenged. The tens of billions of dollars in artificial intelligence investments the Gulf countries have promised could turn into empty promises. If those effects also transmit to U.S. stocks and the broader U.S. economy, it would trigger a chain reaction—at its core, the dollar’s great cycle is damaged. In addition, withdrawing means Iran would take control of the Strait of Hormuz, and America’s geopolitical influence in the Middle East would vanish like a military base destroyed by missiles.

The upside is that Trump can get out of the quagmire quickly. With still about half a year until the midterms, once oil prices fall back, the public’s pain will ease over time. He also still has time to repair his approval ratings by pushing issues such as Cuba, a visit to China, sending money, and cutting interest rates—so as to avoid being swept.

It’s just that, after World War II, successive U.S. presidents put huge amounts of human and financial resources into establishing three core interests in Europe, the Far East, and the Middle East—although after the shale oil revolution, the Middle East’s importance to the U.S. declined somewhat. For Trump, bearing this kind of historical responsibility requires both courage and some “win-ology” rhetoric.

Negotiations can solve the problem at relatively low cost, but the odds of success are not high—unless a third great power is brought in. In the Arab world, the Gulf states’ mindset has already changed with the course of the war, making it hard for them to participate in mediation again. After the Biden administration withdrew troops from Afghanistan in 2021, Pakistan lost strategic value and its ties with the United States have grown increasingly distant. This mediation is viewed as an opportunity to draw the U.S. relationship closer again. Moreover, Pakistan historically has had decent relations with Iran and plays an important role in this round of communication. The recent four-nation talks involving Saudi Arabia, Turkey, and Egypt may become a prelude to a U.S.-Iran meeting.

However, at bottom, there is a clear divergence in both sides’ understanding of the battlefield. From the U.S. perspective, Iran’s navy and air force have been destroyed, and military facilities have been heavily destroyed as well. Life for civilians is extremely difficult. Strength is on the U.S.’s side, so Iran has reason to accept the “15-point plan.” From Iran’s perspective, the U.S. is unable to break through the Strait of Hormuz. High oil prices will fuel anti-war sentiment. Time is on Iran’s side. Therefore, any plan must ensure the war will not happen again—and must involve charging for passage through the strait. In essence, it is about claiming control of the tolls.

In terms of the terms, Iran will find it hard to accept a “15-point” plan based on a pre-war template. In the short term, the war is still ongoing. Hezbollah in Lebanon, Iraqi militias, and Yemeni Houthis are playing important roles on various fronts. At this point, it is impossible to discuss abandoning support for proxies. In the medium term, missiles are Iran’s “signature” deterrent against Israel—what prevents Israel from acting rashly. At this point, it is impossible to discuss limiting missile programs. In the long term, if any agreement can hardly constrain the next invasion, perhaps only nuclear weapons can solve the problem. That is why, before the war, Khamenei made major concessions on nuclear, missile, and proxy issues—and now those concessions have become a matter of life and death.

As for the kind of maximum pressure Trump is good at, it is now difficult for it to work. As prominent figures such as Khamenei and Larijani have been assassinated one after another, Iran’s military leadership has, to a certain extent, entered a more “decentralized” state. This means Iran can maintain military operations, but it is hard for anyone to hold the sway, have full authority, and negotiate with the Americans.

Overall, the saying “the skilled do not boast” still holds—Trump’s relentless pursuit of Hollywood-style spotlights and reality-show-style drama has led him to discard the generous pre-war conditions proposed by Khamenei, and now those conditions may end up just as unachievable.

The troops have a name, and yet they can go anywhere without failure. But this time, the war was initiated by Trump and a small circle around him, under conditions where the Middle East situation was clearly not directly affecting the United States’ national interests. It was not informed to Congress in advance, nor was adequate logistical mobilization carried out. It also took the form of a second surprise attack under the guise of negotiations. The support they could obtain was therefore very limited. As a result, the two Marine units currently deployed, one airborne division, and potentially 10,000 Army troops are already approaching the upper limit of what Trump can deploy. This means the options for a U.S. amphibious landing battle are extremely limited. Whether it’s clearing enriched uranium, occupying islands in the Strait of Hormuz, or occupying Khark Island, there will be high risks of casualties, and it may trigger a series of cascading reactions that escalate the situation.

If the option is to clear enriched uranium, the advantage is that the problem can be solved without direct combat—especially addressing Israel’s concerns. The downside is that the difficulty is enormous. The Tehran hostage crisis in 1980: then-president Carter launched Operation Eagle Claw to rescue the hostages by penetrating deep into Iran’s interior. The mission failed. Not only were the hostages not rescued, several soldiers and aircraft were lost. That contributed to Carter’s failed bid for reelection in 1980 and Reagan taking office. Enriched uranium is buried in three underground nuclear facilities bombed last summer. For Trump, it is essentially like repeating Eagle Claw three times, so the difficulty is self-evident. If the mission fails, Trump’s political reputation would be severely damaged, and all planning would be thrown out and started over.

If the option is to occupy islands in the strait, the goal would be to control the strait and restore freedom of navigation. The challenge is that even if the islands are captured, freedom of navigation may not necessarily be restored. Instead, there is a risk that the war becomes a prolonged war of attrition—or even expands further in scope.

The key to controlling the strait is several important islands on the western side of the strait, including Qeshm Island, Abu Musa Island, and Great/Little Tunb Islands. If you go by sea, when passing the eastern side of the strait you would pass Iranian territory, facing the risk of being attacked. If you go by land, although you can directly reach the western side of the strait, you would still need to rely on the territory of Gulf countries such as the UAE, or even amphibious vessels—something Iran could view as an intervention in the war. A spokesperson for the Iranian parliament recently said, “Intelligence shows that Iran’s enemy is planning to occupy an Iranian island in a region’s support. If the other side takes any action, Iran will attack that region’s key facilities.” Considering that the UAE has territorial disputes with Iran over Abu Musa Island and the Great/Little Tunb Islands, being pulled into the conflict is indeed possible.

What’s even more troublesome is that even if the strait is controlled, it would only open a door. Oil tankers still need to enter the Persian Gulf to refuel. Iran’s coastline in the Persian Gulf is over 1,500 kilometers long, so it is unlikely that the U.S. military would deploy defenses across such a long coastline. Iran only needs to strike oil tankers near the coastline within the Persian Gulf to effectively keep the route closed in practice. Meanwhile, for U.S. troops landing on the island, not only would they face the attrition of missiles/drones, their logistics and resupply on the island would also be very difficult. If they choose to withdraw, they would face even higher risks of casualties—by which time the entire process could easily take more than a month. During this period, shipping through the strait would be completely disrupted. Iran’s previous crude oil exports of nearly 2 million barrels per day would become a new supply-demand gap.

If the option is to occupy Khark Island, it could control Iran’s oil lifeline and force it into ceasefire negotiations. The difficulty is that the offensive operation is even harder, and it could also lead to an expanded area affected by the war.

Khark Island lies deep in the Persian Gulf. If amphibious vessels are used for a sea route, capturing the Strait of Hormuz would become a prerequisite. If airborne operations are used, the available forces would currently be limited to the 2,000 soldiers from the 82nd Airborne Division, making the difficulty of capturing and holding the island higher. If it goes by land, it would need to rely on the territory of Gulf countries such as the UAE or Saudi Arabia, which also carries the risk of pulling more countries into the conflict and escalating the situation further. In addition, Khark Island is densely packed with energy facilities such as oil storage tanks and oil pipelines. If the offensive process damages those energy facilities, Iran had threatened to attack neighboring countries’ energy facilities.

Therefore, if you want to rely on Khark Island to de-escalate the situation, you would need the U.S. military to fight a “good war” and capture the island without harming the island’s energy facilities, and you would also need Iran to “change its posture”—to be willing to negotiate a ceasefire with the United States after losing the island, instead of continuing to bleed it with missiles/drones. The prospects are uncertain. In fact, Carter also considered occupying Khark Island in 1980 to force the Iranians to accept negotiations, but ultimately he backed off due to concerns about personnel casualties and an energy crisis.

No matter which form of landing battle is chosen, it may trigger the Houthis to join the battlefield. If the Houthis attempt to blockade the Strait of Mandeb, it would mean the “Gulf of Aden–Strait of Mandeb–Red Sea–Suez Canal–Mediterranean” route that carries 12% of global seaborne trade and connects Europe and Asia faces a risk of disruption. Shipping would need to detour around Africa’s Cape of Good Hope, which would further push up freight rates, increase prices, and reduce supply chain efficiency.

In summary, with the current situation, time is not on Trump’s side. Considering the 60-day authorization limit for military action, the vision of a visit to China in mid-May, and the arrival of a second Marine Corps unit in the Middle East in 2 weeks, he may make a decision in the next 1–2 weeks, at which point the situation will gradually become clear. Advancing may not solve the problem; instead, it could create a prolonged war and escalate the situation. Retreating would certainly cost him political reputation and national interests, but with still about half a year until the midterms, after oil prices cool he will still have time to repair approval ratings through issues such as Cuba, a visit to China, sending money, and cutting interest rates—so as to avoid being swept. The TACO option is still on the table, and this is still Trump’s war alone.

Source of this article: Snowtao Macroeconomic Notes

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