The Iran war diplomacy is now in its most duplicitous act. There are missiles still in the air, oil traders are still skittish, and a new spy chief has just come into Mossad headquarters with a charge to take down a government. Welcome to the Middle East in June 2026!

When a war does not end on time there is a particular type of exhaustion. After Iran downed an American drone over the weekend, the United States bombed radar and drone sites in Iran before Tehran fired missiles at American troops in Kuwait which, the U.S. claims, it thwarted. This exchange happened on June 1. Two days later, both Washington and Tehran continue to claim that they are “in talks.” Whether that diplomacy or choreography is, depends on which side of the Atlantic you're reading from.

The lack of clarity regarding the situation of negotiations was getting more evident this week, when Iran's state news agency Fars quoted an anonymous source as saying Iran and the U.S. had ceased exchanging messages several days ago. However, President Trump and Secretary of State Marco Rubio both refused to back down from that notion, saying negotiations are still ongoing. Rubio took it one step further and told the Senate Foreign Relations Committee that there is "the prospect" Iran might be able to negotiate some aspects of the nuclear program, and that Iran has to reopen the Strait of Hormuz as a precondition for any larger deal. So either the channel is open or it's not, no one seems to know which!

It's not a simple term argument. What happens next will affect the entire economic system of the region – and parts of the world's energy market. In fact, the war in Iran and closure of the Strait of Hormuz is regarded by the International Energy Agency as the "largest supply disruption in the history of the global oil market" in 2026. That's not a think-tank paper in a drawer. It's the reality of life that put oil trading desks into near-panic mode, from London to Singapore.

When you plot the numbers, it's truly staggering! Analysts estimate oil demand may drop by as much as 2 million barrels a day for as long as a month if the Strait of Hormuz is shut. The price of oil in the WTI surpassed $90 per barrel, on average, in the wake of the Hormuz closure, which analysts call the largest geopolitically driven oil supply disruption in history, two to three times the magnitude of 1973 and 1990. But that's before things get sticky. Since the official closure of the Hormuz on 4 March, the price of Brent crude has risen above $120 per barrel, and the UAE, Saudi Arabia, Iraq and Kuwait have reduced oil production, collectively, by at least 10 million b/d by mid-March, with QatarEnergy declaring force majeure on all exports.

What traders were pricing in, Goldman Sachs Research has affixed numbers to, is about $14 more per barrel, as of early March, a risk premium equivalent to a full four-week shutdown of Hormuz flows, with about 16 million bpd of oil flows on the line in the event of a total closure, allowing for pipeline diversion capacity. Bloomberg Economics took it one step further and modelled out scenarios for $170 per barrel, when the effect on inflation and growth would be roughly double and would result in a stagflationary shock that has repercussions from central bank interest rates to the results of the US midterm elections.

In early April, a ceasefire agreement was reached, offering some temporary relief. Global oil prices plunged about 20% from their 2026 peaks, with Brent trading at about $92.56 by late May as traders became more optimistic about the chance for a sustainable agreement to ease the flow of oil through the Strait of Hormuz. Markets celebrated. But the celebration was accompanied by an asterisk. Even if the Strait is reopened, analysts at energy market consultancy Wood Mackenzie predicted that it would likely be only partially, as many energy facilities, refineries and pipelines have been damaged in the Gulf, and security concerns remain for the tanker traffic and inventories are low.

The caution speaks to an even more difficult reality when diplomats shake hands in Islamabad, the physical theater of war does not necessarily reset. The facts from the waters of Iraq speak ominously loud. In mid-March, Iranian boats carrying explosives attacked in Iraqi waters two fuel tankers, setting them on fire and killing one crew member. The attack brought to at least 16 the number of vessels hit in the region since the fighting started, and shipping in the Gulf had been all but paralyzed since U.S. and Israeli strikes began Feb. 28. An Indian ship's crew member was killed when his crude oil tanker, owned by the United States, was attacked off the coast of Basra in Iraq. Iraq's oil ports completely closed after the attacks. If attacks on Iran continued they would not let "one litre of oil" be pumped from the Middle East to the U.S., Israel or its partners, Iran's Revolutionary Guards said.

This week, another incident in the vicinity of the Iraqi waters. After finishing the loading and unloading of cargo at Umm Qasr Port, a Panama-flagged ship, identified as MSC SARISKA V, had an explosion in Iraqi territorial waters near buoy number five. The Iraqi authorities initially blamed a potential technical malfunction, but no casualties were reported and investigations continue. It comes at an awkward time, when diplomatic tensions are again being raised about whether talks have actually stalled. Each of the mysterious Gulf blasts this time takes place in a geopolitically important environment that calls for investigation, no matter what the initial report indicates.

The Kuwait aspect of this conflict is worthy of another discussion. Operation True Promise IV, aimed at American and Kuwaiti assets, started on Feb. 28 with Iranian attacks against Kuwait. Iran had launched a total of 97 ballistic missiles and 283 drones killing seven Kuwaiti soldiers and wounding dozens, and four U.S. servicemembers and wounding 77 by the end of the campaign. The survivors of a particular drone strike that killed six U.S. military personnel disagreed with the Pentagon's description of what happened, claiming their unit was left dangerously vulnerable when it was hit, and an all-clear signal was issued just 30 minutes before. That inquiry has erupted into a political controversy in Washington, with Democrats calling for Defense Secretary Hegseth to be held accountable for what they say are force protection failures.

Throw in one more factor that may be understated in the western reporting who, after all, is now controlling Israeli intelligence? Roman Gofman took over the Mossad role from David Barnea on June 2, 2026, after a protracted court battle, with petitions against his appointment dismissed by Israel's High Court one day prior to the swearing-in ceremony. This isn't a normal change. Born in Belarus, Gofman immigrated to Israel at age 14 and served for a long time as an armored corps officer, seriously wounded when he fought Hamas militants in Sderot on October 7, 2023. During the swearing-in ceremony, Netanyahu told the new head of the Mossad that Tehran's regime's "days are numbered and we will help bring that about.

This sentence does a lot of work! It is not the language of a Government making preparations to enter into a permanent peace treaty. It's the speech of a government that sees the ongoing ceasefire as a tactical pause, not a strategic conclusion. That is the attitude that is reflected in Gofman's appointment. His absence of intelligence experience has been a possible liability some analysts have noted that the agency might suffer if he fails to be intelligent about it but to Netanyahu, loyalty and ideology have been more important than institutional experience. Incoming Mossad chief attended a right-wing religious Zionist school in a West Bank settlement. He joined Netanyahu's office in 2024, and is viewed as close to the political worldview of the prime minister.

What Gofman's appointment suggests in conjunction with Netanyahu's comments at the ceremony is that Israel's intelligence approach to Tehran is changing from intelligence-gathering to active destabilization. The Mossad has always enjoyed huge autonomy; Netanyahu, who has a military background, not espionage, will probably reduce that. It is important to the region's sidelines that are watching – Jordan, Egypt, the Gulf states. This “Mossad” which doubles as Netanyahu's political instrument is a different type of player in an already volatile situation.

Step back to the 30,000-foot level and the strategic picture that is revealed is not one of de-escalation. It's one of the controlled escalations... with breaks for photo opportunities. His son has been named as successor to Iran's Supreme Leader Khamenei, who was killed by the initial February strikes. Iran has carried out a series of counter-strikes against Israel, U.S. military bases in the region, military and civilian sites in Arab states. One of Iran's counter-measures was to shut down the Strait of Hormuz, a major trade route in the world for fuel and gas. But the regime in Tehran hasn't come to an end as planned. It has adapted, it has decentralized, and it has fought the asymmetric warfare in various theaters at once.

What we are witnessing, minus the diplomatic jargon, is a struggle over whether Iran can continue to hold on long enough to wring a negotiated result that secures its basic interests (not least, some kind of nuclear program) in the face of economic strangulation and military pressure from the U.S.-Israeli side for capitulation or regime change. Both sides are far from reaching their ultimate goal. Trump has yet to formally approve a 60-day memorandum of understanding that was reportedly agreed to by negotiators for a ceasefire and for nuclear negotiations to begin. At the same time Iran said it had a 10-point plan that it had asked the U.S. to accept a plan it said was a fabrication by Washington.

The difference between these two accounts is not a communications issue. It's a measure of the real distance between the two sides. The United States has always called for zero enrichment, dismantling of Iran's ballistic missile program, and severing ties with the region's proxy forces. Iran has previously said its missiles were "not up for negotiation. Both these positions cannot be true at the same time. Unless one side is going to have to move a lot, or the war will be resumed.

None of this is abstract for India and Asia, which accounts for some 80% of the oil that passes through Hormuz. Gulf oil exports are halted if they are stopped entirely, which would knock off nearly 20 percent of world oil supply, with roughly 80 percent of the lost production going to Asia. This has led to inflation shock, supply chain disruption, and currency pressure all around South and Southeast Asia a story the Gulf-centric news cycle is unlikely to report. Vietnam experienced a shortage of fuel. Indian refiners were forced to look for substitutes. All airlines handling flights in the region have been forced to reprice their whole fuel hedging book.

What's important to ask is, what does “resolution” sound like from here? Washington would call it a victory and Tehran would call it a historic recognition of Iranian sovereignty, a deal that lets Iran have a limited civilian nuclear capability, while making Hormuz open up and bringing an end to proxy support. Such a deal would be met with anger by the Israeli right, which has just appointed its most ideologically hawkish intelligence chief in a generation. It would also be met with stiff opposition in the U.S. Senate, where the hawks have been more vocal than the deal-making during this conflict.

The other option the maintenance of military pressure on Iran until its new regime collapses or submits also poses huge risks, including for the world economy if the Hormuz disruption proves to be permanent rather than episodic.

Currently the ceasefire is respected. Barely. The missiles shot at Kuwait on June 1 were shot down. The vessel which exploded off Umm Qasr has been described as a mechanical failure. According to the government's spokesperson, either discussions are still in progress or they have been put on hold. But the new guy at Mossad enters his first day on the job with a mission to take out an enemy regime.

If it sounds like the beginning of a stable peace, you might want to set your expectations down.