Gregg Carlstrom
@glcarlstrom · International correspondents — Israel & region
Gregg Carlstrom is The Economist's Middle East correspondent and among the highest-signal analysts of the region in any newsroom.
It's not a forever war, it's just a little three-year excursion Think a whole bunch of things, military and economic, are likely to break before then—for America, Iran and Gulf states—that would compel some sort of deal before 2029. This really isn't sustainable until then The question is just how much breakage we'll have before we get to that point
Just a wonderful irony that we have an extremely pro-crypto Trump administration waging economic war against a country that uses crypto as one of its main tools for sanctions evasion "In 2025, nearly $10bn worth of crypto was moved through Iran." https://t.co/kp9JBzktPZ
The ban on settlement goods has limited economic impact. Potentially far more significant is the promise to "target those who finance, facilitate or construct new settlements", but let's see what that actually means in practice
Think this may become a political question as much as a military one. There is a strategic case for shrinking or even shuttering some American bases. But would it be perceived as abandoning American partners that feel a serious threat from Iran?
It's not even entirely clear what the mediators are meant to be negotiating right now. A return to the MOU? A more comprehensive deal of the sort that eluded Trump earlier this year? A narrow ceasefire/Hormuz agreement?
I'm sure Saudi Arabia's new allies in the much-ballyhooed Mecca Defense Alliance will swing into action any moment now
"Kpler estimates that current deliveries of around 1m bpd—which mostly go to China—could exhaust the store of Iranian oil on the water by mid-October." "Some Chinese buyers are turning to Saudi, Iraqi and UAE crude. In some cases, Iranian oil now costs refiners more than competing supplies due to its relative scarcity." https://t.co/8fq1HOIvV7
Not even sure who they're trying to convince when oil is >$90 a barrel, gas prices are 30% higher than a year ago and diesel is at an all-time high Said this before but the Gulf war feels like the moment when Trump's reality-distortion field finally broke
We've had months of discussions about Iran's "confidence" that don't really engage with the issue of Iran's capabilities The regime might be feeling its oats, but what is the state of its missile stockpiles/production? How long can it sustain either the status quo or an escalated conflict? And most importantly, what is the theory of victory by which it might compel Trump to accept its demands? Maybe some of those questions are unanswerable. But they ultimately matter a lot more than "confidence" https://t.co/1dzi0DTCrW
In Iran: "Official unemployment rose to 9.1% in the spring... even for those still in work, the average monthly salary of around $125 a month comes nowhere near meeting basic household spending requirements that come to around $450 a month." https://t.co/FlBn58vEn9
So the Trump administration tried to negotiate a comprehensive deal with Iran, settled for a vague MOU when that effort failed, watched the MOU fall apart and is now back to insisting on a comprehensive deal. Around and around we go https://t.co/yYYWDDqdsQ https://t.co/bHmBK3DWDq
Gulf leaders had hoped economic activity would bounce back after the summer. Instead they "expect the rest of the year will be a washout": - passenger traffic at Dubai airport was down 31% in the first half of 2026, and hotel occupancy fell 24 points - big events are being cancelled or moved: the Bahrain Grand Prix will take place in Malaysia; Saudi Arabia shifted an e-sports tournament to Paris - residential property sales fell 31% in Dubai (and 59% for luxury properties) - Asian countries, such as Singapore, are trying to attract firms that might want to leave the Gulf https://t.co/LXJfuabOZY
At Jebel Ali, the largest port in the Middle East: "Volumes plunged more than 90% in the early weeks of the conflict, according to DP World executives, and have barely recovered since." A data point to keep in mind when people in Washington claim America is wrenching the strait back open. Those claims are narrowly focused on oil. An enormous range of other goods still isn't getting through Hormuz. https://t.co/AMSFM4GCej
"White House officials will consider ramping up military action after the November 3 vote." Seems plausible that they will. Some in Iran hope that a Democratic victory in the midterms would hasten the end of the war. But a wounded, lame-duck Trump is likely to be a more aggressive foreign-policy actor. And if you're counting on Congress to stop an unpopular conflict... I mean, have you met Congress? https://t.co/ZkQYbF4QwK
"China's aircraft [in Egypt] were the first to stage mock combat with French-made Rafale fighters, which are used by Egypt but also by India, whose border dispute with China flared into deadly clashes in 2020." https://t.co/Gk6p2sgW9Q
He can declare it whatever he wants, but if American warships are still blockading Iranian ports and escorting oil tankers through Hormuz then, um, it's not actually over
"For the first time on record, Iran has gone about seven weeks without shipping meaningful crude exports through the Strait of Hormuz." So in operational terms, the blockade is working. But throttling oil exports is a means, not an end. The question is when/if it compels a change in Iranian behavior, and the answer, needless to say, is unclear. https://t.co/BZXHBpSB9U
At some point in the coming weeks we should actually be able to test these assertions, because exports from the Gulf would show up as imports elsewhere (which are far easier to track)
"Netanyahu's alliance of hard-right and religious parties may not be capable of winning a majority, but he is already dictating the terms by which his rivals will try to form a government. His campaign is steadily pushing Eisenkot towards harsher nationalist positions." https://t.co/cBtnZMuVFW
Long lines for gasoline have become a common sight in Iranian cities, and the regime may have to raise subsidized prices (at a time of >80% inflation), something that has triggered unrest in the past. Imports "have been all but cut off by the continuing US naval blockade of Iran's southern ports. Domestic production of gasoline has also decreased... as strikes have damaged Iranian refineries and limited their capacity." https://t.co/qC1iMhicDp
We're at a point where neither side has a coherent theory of victory in the Gulf war. On the one hand "mowing the lawn" is a tactical plan, not a strategy. It commits America to a prolonged, expensive operation to oversee and secure Hormuz transits. Even if the administration is correct that 8-10m bpd is exiting the strait, crude is a narrow metric. There's still almost no movement of LNG or refined products, nor of the bulk carriers and container ships that supply the GCC with imported goods. So the status quo imposes a steep cost on Gulf states as well. At the same time, if Iran can't get the headline price of oil to catastrophic levels, Trump is unlikely to feel much pressure to make a deal. Especially since he seems to have dismissed concerns from within his own party and written off the midterms. Meanwhile, the blockade will continue to inflict pain on Iran. Instead of trading its Hormuz card for economic benefits, the regime is holding onto it at enormous cost. Nothing about the status quo looks sustainable—and yet neither side seems to have a way to break it.
Iran has made these demands for months, many of them featured in the MOU and America was fulfilling some of them (ending blockade, lifting oil sanctions) before Iran resumed attacks on ships In some ways this still looks like a sequencing problem, which was a central flaw in the MOU. Iran wants to front-load as many benefits as possible before it reopens Hormuz and diminishes its leverage But at some point it needs to decide what it is *actually* willing to accept
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