The message from the Oval Office this week has been hard to miss negotiate now or watch the lights go out in Tehran and Washington has thrown its full weight into the mix in the standoff in the Persian Gulf. Just a month after easing its blockade of Iranian ports as part of a temporary truce, the United States has resumed the blockade, coupled with new airstrikes and a call for power stations and bridges to be added to its list of targets if Iran keeps walking away from the negotiating table.

The visuals are on purpose grim. In a Fox News interview Tuesday night, President Trump announced an escalation plan he said would occur nearly every day, as if it were a script, starting with "hit them hard tonight, hit them hard tomorrow" and finally the energy infrastructure would be "next week" (the last time he could have mentioned "next week" was the night he was elected. It's the pattern this Administration has observed; threaten the most destabilizing, then wait figure that Iran's energy network is susceptible to being flattened and that would lead to the kind of chaos that Washington would prefer to avoid.

Once the rhetoric is out of the way, on the ground, the escalation is real. In the Arabian Sea, more than 19 American warships two carrier strike groups and amphibious assault ship with over a thousand Marines deployed, supported by hundreds of aircraft in the region. A seven-hour wave of strikes this week knocked out the capabilities of missile sites, drone bases and coastal defense installations, part of a campaign aimed at disabling Iran's ability to threaten commercial shipping crews, U.S. Central Command says, and seven vessels were attacked in the past week alone, with close to a dozen sailors killed, injured or unaccounted for. The response from Iran arrived in a matter of hours: attacks on U.S. forces near Azraq base in Jordan, and on U.S. sites in Bahrain and Kuwait, which officials in Kuwait said caused some fire damage and material damage. Tehran's Revolutionary Guard has made it clear what its red line is it wants the Strait of Hormuz closed until Washington stops its "acts of aggression" and a top Iranian official characterized the conflict as a struggle for Tehran's "sovereign rights" to police its waters.

The difference in this round is that of the money. The original proposal was an initial 20% customs tax on all vessels going through the Hormuz straits, which analysts at Financial Times estimated would cost the price of a barrel of oil some sixteen dollars, and cost the supertankers some $32 million each. But that was torn up within one day, not because of any objections from Iran, but because apparently the Gulf monarchies outbid him. The U.S. reinstated the naval blockade, but Trump told reporters in the Oval Office that the Gulf rulers had reached out to him saying that they would invest "billions and billions" into the American economy rather than paying the toll. Whether this is a fresh infusion of funds, or a rehashing of promises made last year on his Middle East trip, it remains unclear, and a key question in determining if this is diplomacy or an improvisation. The International Maritime Organization, on its side, categorically resisted the toll on legal grounds, and U.S. Treasury, in its own capacity, cautioned that anyone sending a toll to Iran would be in violation of the sanctions,

Since the war began in late February, Brent crude has risen by about nineteen percent and futures hit as high as $85.92 a barrel this week, the highest since mid-June, before subsiding to around $78 as traders digested the news of a change in the toll by Trump. The price of crude has risen by more than nine percent in one session since the announcement of the blockade, while the ripple effect is starting to be felt by consumers fuel-price analysts are predicting the national average for gasoline in the U.S. will hit four dollars a gallon in one to two weeks. But an unusual degree of patience has seeped into the market so far, analysts tracking the big picture note, as commercial stockpiles have been drawn down to minimize the impact, but that cushion is beginning to shrink something commodity researchers note would be a far more vulnerable market than it was in March/April when the supply shock occurred. The same applies to shipping data: vessel traffic has been declining by more than half this week, on top of the previous steep drop, and marine insurers have publicly stated that they would only start to price the risk down if there was a genuine ceasefire, not another fragile pause. Major oil companies have remained adamant about this, however, with Chevron's chief executive stating that the firm would not pay any toll to Iran, warning a transit fee would be precedent for other chokepoints, including Malacca and Bab el-Mandeb.

The latter is a warning for the rest of the world economy. The prospect that Iran, who is unhappy in the Gulf, could be able to move in on the Red Sea route too, adding to the Red Sea and the Gulf as two choke points, has become a growing concern for regional analysts. Add to this the fact that Asian equity markets are reacting to every news item out of the Gulf, and European shippers are moving around both waterways or cutting off their losses, and Pakistani mediators are working 24/7 to pull Washington and Tehran back to a negotiating table they both say they still want yet they are both making themselves sound unreasonable, and the result is what looks like an economy taking a hit simultaneously.

The bad news is that both sides don't seem to be bluffing all that much. Washington has the means to back Trump's threats; Tehran has repeatedly demonstrated it will take a lot of punishment before it backs down on Hormuz. The intermediate option the one both governments agreed to in a recent few weeks is somewhere between these two points, and some question whether that can be salvaged or whether the region is heading back toward the open warfare it briefly escaped. The answer to that question could turn out to be in the near future, not in the next few months.