The oil order is heading toward collapse. What will happen next in the Middle East?

Title: The Bargain: How Fifty Years of Peace Came to an End
Author: Garrett
Translation: Peggy, BlockBeats

Author: Rhythm BlockBeats

Source:

Repost: Mars Financial

Editor’s Note: Over the past few weeks, the market initially tried to understand the dramatic developments using familiar frameworks—airstrikes, blockades, oil shocks—seemingly just another typical Middle East crisis. But as time progresses, a more unavoidable question has emerged: if the decades-long “implicit bargain” has broken down, what path will the world follow to rebuild a new equilibrium?

This article uses “bargain” as a thread to analyze the formation, cracks, and collapse of Middle Eastern order, pointing out that the key issue is not the outcome of a specific military operation, but the simultaneous failure of two underlying rules: “the U.S. does not touch Iran’s regime” and “Iran does not block the Strait of Hormuz.” When these mutually constraining boundaries are broken, the evolution of conflict is no longer bound by old logic.

For the future, the article predicts: in the short term, the situation may swing between “ground war” and “deterrence cooling”; but in the medium to long term, more definitive changes are already beginning to appear: selective passage is reshaping alliances, energy transportation routes are being forced to reconfigure, and the link between the dollar and security is loosening. These changes will not reverse with a ceasefire or negotiations but will gradually solidify into a new structure.

Below is the original text:

On March 24, 2026, a 45,000-ton displacement warship is speeding from Japan toward the Persian Gulf.

The USS Tripoli, an amphibious assault ship also called the “Lightning Carrier” by the U.S. military, has 14 F-35B stealth fighters on its flight deck—currently the only fifth-generation aircraft capable of vertical landings. In 2022, the U.S. Navy conducted a critical test on this ship: deploying 20 F-35Bs simultaneously, fully validating the “Lightning Carrier” operational concept. As the Seventh Fleet commander said: “Just 14 fifth-generation fighters on the deck constitute a highly deterrent sensing and strike system.” Depending on the mission configuration, it can serve as a light stealth carrier, or be equipped with “Osprey” tiltrotors and “Super Stallion” helicopters to deploy 2,200 Marines for landing operations. Expected arrival: March 27.

Meanwhile, another amphibious group has set sail from San Diego—centered on the USS Boxer, carrying about 2,500 Marines, with a voyage of roughly three weeks. At Fort Bragg, the 82nd Airborne Division’s Rapid Response Brigade is also on standby. This roughly 3,000-strong force is the fastest ground deployment in the U.S. military, capable of being dispatched worldwide within 18 hours.

The Pentagon has a contingency plan: coordinated amphibious assault and airborne seizure. The core target is Iran’s largest oil export hub—Kharg Island, just 25 km from Iran’s coast, responsible for about 90% of the country’s oil exports. Additionally, the islands controlling the entrance to the Strait of Hormuz—Qeshm and Kish—are also potential targets. However, retired Vice Admiral John Miller warned: even if these islands are occupied, long-term control is unlikely—Iran can still rely on its mainland to interfere with shipping. Once the operation begins, it will be the largest amphibious assault since Vietnam. Once fully assembled, U.S. deployment in the Middle East could reach 50,000 troops.

All this was hard to imagine a month ago.

A few weeks earlier, the U.S. and Israel launched airstrikes against Iran; three weeks ago, Iran blocked the Strait of Hormuz—the global energy artery transporting 21 million barrels of oil daily; two weeks ago, international oil prices surged past $110; a week ago, senior U.S. military officials signaled to allies that they “may have no choice” but to initiate a ground invasion.

From the timeline, this is a rapid escalation path. But if we look at it over fifty years, each step has a clear historical starting point. What seem like “out-of-control” decisions at the time were almost always rational calculations.

To understand how all this happened, we need to go back half a century.

The “Bargain”

In the 1970s, monarchies across the Middle East fell one after another.

In 1952, Nasser overthrew King Farouk of Egypt; in 1958, the Faysal monarchy in Iraq was toppled in a military coup; in 1969, Gaddafi overthrew King Idris of Libya; in 1979, Khomeini overthrew the Pahlavi dynasty in Iran. Each revolution was under the banner of Pan-Arabism—“Arab unity against the West and Israel.” The outcomes were similar: strongmen came to power, U.S. embassies were burned, and oil was nationalized.

Remaining monarchies—Saudi Arabia, Kuwait, the UAE, Bahrain, Qatar—watched their neighbors fall and fell into existential anxiety.

Thus, an unwritten “bargain” naturally formed: the U.S. provided security guarantees; Gulf monarchies sold oil priced in dollars, and the oil dollars flowed back into U.S. Treasury bonds.

There was no formal contract, no signing ceremony, no fixed term. A common misconception is that “the U.S. and Saudi Arabia signed the 1974 Petrodollar Agreement.” In fact, the declassified memo of Nixon’s meeting with King Faisal at the White House is only four pages, discussing Middle East politics, with no mention of oil pricing or dollar settlement. This was not an agreement but a “bargain”—a behavioral pattern that naturally emerged when both sides’ interests aligned.

Remember this word. Because what collapsed in 2026 was another forty-year “bargain.” And the fragility of this bargain lies precisely in its lack of enforcement mechanisms—once one side re-evaluates gains and losses, the equilibrium irreversibly disintegrates.

To understand why Gulf states still cannot openly embrace Israel—despite perhaps privately wishing to do so—we must see a structural reality: the Arab world is, in some ways, a mirror of Europe. Europe is “small nations forming large states,” while the Arab world is “one large nation divided into many states.” From Morocco to Iraq, people speak the same language, share the same religion, yet are divided by colonial-era borders into dozens of countries. The narrative of “uniting against Israel” has a broad popular base.

Strongmen who once championed this banner—Nasser, Saddam, Gaddafi—were ultimately removed. But their countries did not improve; instead, they fragmented: Iraq became a battleground for Shia militias, Libya fell into warlord chaos, Yemen fell under Houthi control. More critically, public nostalgia for these strongmen persists—they symbolize the “Arab rise.” This creates a dilemma for Gulf monarchies: they host U.S. bases but cannot allow these bases to be used against Iran. Opening bases would mean “fighting Muslim brothers for the U.S. and Israel,” with domestic political costs potentially far higher than missile strikes.

In this context, Iran developed a highly sophisticated nuclear strategy. Khamenei’s principle is simple: stay just below the threshold—always capable of crossing but never actually crossing. In game theory, this is called “fuzzy deterrence”: achieving nuclear deterrence without the full sanctions and isolation that North Korea faces. Enriching uranium to 60%—weapon-grade is 90%, but you can never be sure how close I am—this balance could have lasted indefinitely.

And in the Strait of Hormuz, another older “bargain” has operated for forty years: the U.S. does not overthrow Iran’s regime, and Iran does not block the Strait.

It has withstood extreme tests. During the Iran-Iraq War (1984–1988), the “Tanker War,” both sides bombed oil tankers, and the U.S. Navy even engaged directly with Iran (“Operation Manta”). Yet Iran did not block the strait. In the 2025 “Twelve-Day War,” the U.S. and Israel targeted Iran’s nuclear facilities—almost touching its survival bottom line—but Iran still did not block the strait.

Why? Not because Iran is “weak,” but because rational calculations point to the same conclusion: 90% of Iran’s oil exports depend on this strait, and a total blockade would be economic suicide. The U.S. also knows that if the strait is truly closed, there are almost no military means to reopen it quickly. Both sides have strong incentives to maintain the status quo—never crossing the red line of survival.

This equilibrium seems capable of lasting forever.

Cracks

The cracks began with a treaty initially aimed at repairing relations.

In 2015, the Obama administration’s Iran nuclear deal (JCPOA) included a “sunset clause”: key restrictions would gradually expire after 10 to 15 years, allowing Iran to legally resume high-level uranium enrichment. This was essentially a promise: “Endure ten more years, and you will regain legitimacy.” Israel and Saudi Arabia were extremely dissatisfied: it was like telling Iran that time was on their side.

In 2018, Trump announced withdrawal from the JCPOA. The logic of this decision was not unreasonable—“the sunset clause” was indeed a ticking time bomb. But the problem was that there was no alternative plan. The new equilibrium became: U.S. sanctions continued, Iran slowly advanced. U.S. intelligence assessed that Iran had not made substantial progress toward nuclear weaponization. It was an ugly but relatively stable state.

Trump’s real strategic focus was elsewhere: the Abraham Accords.

This plan was quite clever: the U.S. needed to shift strategic focus to China, outsourcing Middle East security; and to do that, a common enemy (Iran) was needed to bind Gulf states and Israel together. Israel provides security capabilities, Gulf states provide economic resources, and the U.S. acts as coordinator and platform. Logically, it was nearly flawless.

But it depended on a premise: public opinion in the Gulf must accept Israel.

The only way to fundamentally resolve this is for Israel to retreat to the 1967 “Green Line.” This is also the bottom line repeatedly hinted at by Saudi Crown Prince MBS. Once Israel withdraws, not only will public resistance in the Gulf decrease significantly, but even Iran will lose its core narrative for mobilization. The banner “Israel occupies our land” would no longer be effective if land is returned. Under such circumstances, Iran’s occasional missile launches would actually reinforce Gulf states’ security dependence on Israel. The U.S. only needs to hold a bottom line: Iran must not acquire nuclear weapons. Because once nuclear proliferation begins (Iran gets a nuclear bomb, Saudi Arabia will follow; after Saudi, Turkey will find it hard to stay out), the situation will spiral out of control.

But Netanyahu will not retreat. Israel’s far-right sees settlements as a “biblical promise,” and retreating to the Green Line is politically impossible domestically. That’s why Saudi Arabia has never joined the Abraham Accords.

Then, 2025 arrived.

The U.S. and Israel launched the “Twelve-Day War,” directly striking Iran’s nuclear facilities. From Iran’s perspective, this crossed a fundamental red line. Bombing its nuclear capacity deprived Iran of its last “insurance”—the implicit forty-year promise that “the U.S. will not overthrow the regime”—which is now gone. You broke the rules first.

The collapse of this set of bargains followed. In the past, Iran did not block the strait because “you don’t touch my foundation, I won’t touch your lifeline.” Now that the foundation has been touched, what is the point of not blocking the strait? Nothing.

The premise of the bargain has vanished. But anger alone is not enough. Iran also needs capability and timing. Between 2025 and 2026, these three conditions matured simultaneously.

First, a qualitative change in military capability. Previously, “blocking the strait = suicide,” because Iran could not achieve selective blockade. Today, Iran has low-cost drone swarms, precise anti-ship missiles, and sufficient information technology to do “only block your ships, not mine”—allowing Chinese and Russian ships through, intercepting U.S. allies’ vessels. Selective blockade transforms from a “suicide” act into a sustainable strategic tool.

Second, legitimacy. “You bombed our nuclear facilities first”—this has enough persuasive power in international opinion.

Third, tacit approval from China and Russia. They do not need to openly support Iran—just maintain “plausible deniability”—we are not involved but do not condemn. This gives Iran diplomatic space.

On the day Iran’s nuclear facilities are bombed in 2025, these three conditions align. From a game theory perspective, blocking the Strait of Hormuz in 2026 is not an “impulsive” move but a card that should have been played—just lacked the timing, capability, and legitimacy before.

The core issue: the U.S. tore up the first part of the bargain (not overthrow the regime → bomb nuclear facilities) but expects Iran to honor the second part (not block the strait). From a game theory standpoint, this is impossible—unilaterally breaking the contract while demanding compliance from the other side.

The equilibrium thus irreversibly collapses.

Collapse

Returning to March 2026. The scene described at the beginning—“Lightning Carrier,” paratroopers, 50,000 troops—is now understandable. The airstrikes did not open the Strait of Hormuz. Because what you face is not a physical obstacle that can be “cleared” by bombs, but a political equilibrium broken by your own actions.

Bombs cannot solve politics. But the changes in the fourth week go far beyond military buildup. The entire power structure of the Middle East is being reshaped.

Iran: from defense to offense

On March 22, Abdollah Abdollahi, commander of Iran’s Central Armed Forces Headquarters, publicly announced that Iran’s military posture had shifted from defense to offense, introducing more advanced weapons systems and tactics. The next day, Iran claimed effective control of the Strait of Hormuz, adding a significant remark: “At the current level of control, there is no need to deploy mines in the Persian Gulf.”

The implication is clear: we do not need minefields; we already control this waterway in fact.

On the same day, in response to Trump’s “48-hour ultimatum” (either open the strait or bomb power plants), Iran’s military issued a counterstatement: the Strait of Hormuz will be fully closed until damaged facilities are restored; energy, information technology, and desalination facilities in the Middle East will become legitimate targets; Israel’s power and communication systems will also face large-scale attacks.

This is Iran’s clearest escalation signal so far: if the U.S. attacks power systems, Iran will not only block the strait but also expand the war to the entire Gulf energy infrastructure.

Meanwhile, Iran has deployed a more covert and deadly tool.

Foreign Minister Araghchi publicly stated that Iran is willing to allow Japanese ships to pass through the Strait of Hormuz. South Korea later announced similar negotiations. The logic is very clear: countries involved in attacking Iran—blockades; neutral countries—can negotiate; countries with fractured alliance stances—must choose sides.

Iran is using “passage rights” to reshape the international alliance structure. This is no longer simple military blockade but turning “who can pass” into a diplomatic currency.

Trump: Ultimatum → Retreat → Re-ultimatum

Reviewing the past week, a pattern is becoming clear: Thursday—“approaching a deal,” considering de-escalation; Friday—sudden reversal, issuing a 48-hour ultimatum; Saturday—Iran’s tough response, launching the 75th “Real Commitment-4” operation; Sunday—the ultimatum expires, and the U.S. suddenly announces “constructive dialogue” with Iran, delaying strikes by five days.

Iran directly denied this, with Speaker Ghalibaf calling it “false information manipulated to distort financial and oil markets.” Israel also leaked that U.S.-Iran talks might take place in Islamabad, with Vice President Vance possibly serving as envoy.

Creating tension, setting deadlines, then offering “steps down”—but market trust in this routine is rapidly declining. On March 24, influenced by “dialogue” news, oil prices temporarily plunged over 10%, falling below $100, but the rebound did not change any structural facts: the Strait of Hormuz remains closed, U.S. troops continue to reinforce, and Israel has clearly stated the strikes will last “several weeks.”

Saudi Arabia: the “balancing act” forced offline

One of the most critical variables this week is Saudi Arabia’s shift in stance.

On March 24, according to The Wall Street Journal, Saudi Arabia opened the King Fahd Air Base to U.S. forces—previously, Riyadh had explicitly stated its bases would not be used against Iran. Meanwhile, the UAE closed Iranian hospitals and clubs, cutting social networks; missiles used against Iran are confirmed to come from Bahrain; Saudi privately told the U.S.: if Iran attacks its power and water facilities, it is prepared to retaliate directly. An Emirati senior advisor publicly stated that Iran’s bombing “pushed them toward the U.S. and Israel.”

Remember the “wire” mentioned in Part 1? The Gulf states’ balancing act—hosting U.S. troops but unable to let them be used against Iran because of domestic political costs. Iran’s missiles have directly severed this wire. When power plants and water facilities are hit, “remaining neutral” is no longer an option.

But at the same time, Saudi Arabia also shows another side: strong strategic resilience.

It has launched the 1,200 km East-West Pipeline, running from the eastern Ghawar oil field directly to the Red Sea port of Yanbu. Built in the 1980s to counter the Iran-Iraq War, this pipeline has become a lifeline for global energy. Yanbu’s export volume has surged from less than 800,000 barrels/day pre-war to 3.66 million barrels/day, with peaks over 4 million; at least 25 supertankers are heading for loading; pipeline capacity has expanded to about 7 million barrels/day. Nasser, CEO of Saudi Aramco, said: “This is the biggest crisis in the region’s oil and gas industry ever.”

But the Yanbu route also faces risks: Iran has attacked the local Samref refinery (a joint venture between Aramco and ExxonMobil), temporarily halting shipments; ships to Asia still must pass through the Strait of Malacca, and the Houthi rebels have only “paused,” not stopped attacks; domestic capacity in Saudi Arabia has also been damaged, with Ras Tanura refinery temporarily shut down, reducing total capacity by about 2.5 million barrels/day.

Two Pillars

Putting all this together reveals a more important structural change than any single news event: the two pillars supporting the petrodollar system are being simultaneously weakened.

The first is the narrative of currency. Iran has proposed “RMB for passage rights.” Short-term, this is limited—over 90% of global oil trade still settles in dollars, China’s capital account is not fully open, and Iran is excluded from SWIFT. But the damage is significant—this shifts “de-dollarization” from academic discussion into the battlefield. China does not need to intervene directly: Iran is creating the narrative on the front lines, China maintains ambiguity in the background. The real key is the “seed effect”: once Japanese and Korean shipowners are forced to open RMB accounts for passage, this infrastructure will not easily disappear.

The second is the security monopoly. Since 1974, another pillar of petrodollars has been “security exchange”—the U.S. protects Gulf shipping lanes, and Gulf states settle oil in dollars. Now, this premise is shaking: the U.S. can no longer guarantee the safety of the Strait of Hormuz. Japan and South Korea are beginning direct negotiations with Iran—bypassing the U.S. “security mediator”—facing the “charging party” directly. Once this pattern solidifies, Iran will become de facto controller of the strait, and the U.S.’s role as protector will be hollowed out—if you collect protection fees but cannot provide protection, why should I keep paying?

As the dollar settlement system weakens and the U.S. security monopoly erodes, the two legs of the petrodollar are being cut simultaneously.

This is why the U.S. “must act”: not just a military issue, but because each day of delay accelerates the erosion of these two pillars, making reversal more difficult. But as previously discussed: airstrikes cannot open the strait (no results), occupying islands cannot solve the insurance problem (control and distributed watermine blockade), and doing nothing is impossible (both pillars are collapsing).

This is the true strategic deadlock.

The International Energy Agency (IEA) Director Birol described the current shock as “a superposition of the 1970s oil crises and the 2022 Russia-Ukraine natural gas crisis.” After deploying a record 400 million barrels of strategic reserves, he bluntly stated: the only real solution is the reopening of the Strait of Hormuz.

But currently, no feasible path is visible.

What Will Happen Next

On March 27: the “Lightning Carrier”—the USS Tripoli—enters the U.S. Central Command area of responsibility. On March 28: Trump’s five-day “pause” expires.

Two paths lie ahead:

Path 1: Ground war begins. If negotiations make no substantial progress within five days, the planned operation may be activated. The “Lightning Carrier” provides stealth air strikes, the 82nd Airborne parachutes in, and amphibious forces land simultaneously—classic “three-dimensional island seizure” warfare. U.S. airstrikes have destroyed Kharg Island’s runway; Marine engineers can quickly repair it, then C-130 transports will continue to deliver troops and equipment, forming a complete operational chain. Meanwhile, the thresholds for Saudi and UAE involvement have significantly lowered, and Iran has launched its “punitive countermeasures.” The conflict will escalate from “air campaign” to “multi-national ground war,” extending from weeks to months, and the global energy crisis will shift from “supply shocks” to “structural disruptions.”

Path 2: Deterrence rather than war. The “Lightning Carrier” with 14 F-35Bs passes through the Strait of Hormuz, and Iran chooses not to fire. This scenario is less likely but cannot be ruled out. Its logic aligns with Iran’s current “selective blockade” strategy: the optimal approach is not “full blockade” (which would cut off its own economy and trigger a unified global response), but “controllable deterrence + selective passage.” If the U.S. carrier passes without interception, both sides might achieve a “gray exit”: no formal ceasefire, just de-escalation in fact. The U.S. can claim “the strait is safe again,” while Iran emphasizes “strategic restraint,” maintaining the ability to blockade again in the future. But given Iran’s public declaration of shifting from defense to offense, “allowing passage without firing” is politically nearly impossible—unless some tacit understanding has already been reached. The Israel-Islamabad negotiations leaked by Israel likely point in this direction.

Regardless of which path unfolds, some things will not change: the mechanism of selective passage is reshaping alliance structures; expectations for ground war are lengthening the conflict cycle; high oil prices will “lock” the Fed, making recession harder to offset with rate cuts; the de-dollarization trend among central banks will not reverse due to a single event; and Saudi Arabia’s use of the East-West pipeline is effectively reconstructing the global oil logistics system.

The duration of this war will far exceed the market’s expectations from three weeks ago.

Key Indicators to Watch

• Whether Islamabad negotiations materialize (whether Vance goes to Pakistan): this would be the highest-level direct contact between the U.S. and Iran since 1979, indicating that “backroom agreements” may be entering a framework stage.

• Secret diplomatic moves by Saudi / Oman / Turkey: Oman has historically been a mediator between the U.S. and Iran (the JCPOA negotiations began in Muscat). If activity increases significantly, it suggests both sides are creating “pre-negotiation space.”

• Whether Iran expands the “selective passage” scope: if ships from India or the EU gain passage rights after Japan and South Korea, it indicates Iran is systematically “picking off” members of the U.S. alliance, and the political goal of the blockade is surpassing its military significance.

• The actual route of USS Tripoli after March 27: if heading toward Kharg Island, the probability of ground action increases; if heading toward the Strait of Hormuz, it aligns more with a “deterrence display.”

• Whether non-China/Russia merchant ships begin attempting passage (tracked via AIS data): the first successful passage by a non-China/Russia merchant ship will be a starting point for re-pricing insurance markets and indicates that the blockade is in fact loosening.