[Today’s Iran war post below is more or less complete, but I had to run out. I expect to add a few tidbits when I return, so please return or refresh this page at 8:00 AM EDT]
We have said it would be better if we were wrong about the Iran war not ending in a negotiated settlement, But if a final deal is consummated that is tantamount to a US capitulation, one can argue that that qualifies one of the non-negotiated alternatives we had posited, that of regime change. Whether or not the US and Iran get to a final agreement, Iran has displaced Israel as the dominant power in the Middle East and the perception of US primacy all over the world has taken a major blow.
You can find the text of the Memorandum of Understanding (MOU), as read out to reporters, in Footnote 1. Trump signed it in Versailles. apparently ignorant of the ignominy of the 1918 Treaty of Versailles that ended the Great War. Keep in mind that the odds a deal will not be completed are high, and the 60 day deadline seems unrealistic, particularly given the fact that real estate hucksters and a not-terribly-seasoned Vice President are leading the US effort, plus Trump 1.0 fired many career staffers and more have exited in his second term. Alastair Crooke has pointed out that agreeing to a cessation of hostilities is easy, but once that happens, opponents go to work to pull the two sides apart. We will soon turn to Israel, since the US effectively agreed to enforce an Israel withdrawal from Lebanon, which Israel fiercely opposes. But remember that Iran’s position is that nothing is settled until everything is settled, so we will flag some other points that seem breakdown prone.
In addition, Robert Pape has stressed that global oil supplies will remain on a knife edge through the negotiating period and will actually tighten, increasing Iran’s leverage. Thus Iran’s incentives during the talks will be to be very hard nosed and to threaten to and perhaps actually re-close the Strait of Hormuz, such as if Israel fails to come to heel. Any additional interruption of traffic through the Strait of Hormuz would rattle shippers, extend the timetable for delivery of oil and normalization. That would also maintain Iran’s economic leverage if the negotiation deadline wind up being extended. Keep in mind additionally that the talks going into September could add to Trump/Republican midterm woes.
In case you harbored doubts:
Well, yes, Iran did achieve total victory https://t.co/LTPYFQPPHx
— Noah Smith 🐇🇺🇸🇺🇦🇹🇼 (@Noahpinion) June 18, 2026
The White House read the final terms of the Memorandum of Understanding out to reporters last night. As you can see below, it includes, in Paragraph 1, the US and Iran seek to bind their allies to cease hostilities, including “ensuring the territorial integrity and sovereignty of Lebanon.” That means Israel has to withdraw from Lebanon. More on that later in this post.
Paragraph 13 sequences the process, requiring the parties to start implementing Paragraph 1, 4 (end of US naval blockade; commitment to reduce force accumulation after 30 days), 5 (Iran “best efforts” to restore Strait of Hormuz traffic, with the first 60 days fee free, and to work with Oman and Gulf States on ongoing arrangements), 10 (termination of sanctions and issuance of waivers) and 11 (releasing or providing access to frozen assets) right away and, “the continuing implementation of these measures,” will negotiate the other issues. That means either party can suspend the talks or walk away entirely if they think there is a breach on any of those points.
It also seems that it will be impossible for the US to deliver on Paragraph 6:
The United States of America undertakes with regional partners to develop a definitive, mutually agreed plan with at least U.S.D. 300 billion for the reconstruction and economic development of the Islamic Republic of Iran. The mechanism for the implementation of this plan will be finalized as part of a final deal within 60 days. All required licenses, waivers and permissions needed for the relevant financial transactions will be granted by the United States of America.
Infrastructure deals are extremely complex and very high fee and would require Iran to convey title of the assets being “reconstructed” to the fund, which is na ga happen. It is hard to see how the US, which has done the Gulf States great harm with its Iran war caper, has the leverage to get them to agree to pony up most/all of $300 billion when they have their own rebuilding needs.
So what does Iran do when the US fails to deliver on this commitment? The MOU already contemplates that Iran will regularize its control of the Strait of Hormuz and presumably charge fees after 60 days. We had said that Iran likely understands full well that the US cannot satisfy this requirement and might explicitly use this to impose fees at a level designed to realize $300 billion over time (as in use this explicitly with the Gulf States as an alternative to funding reconstruction). However, Robert Pape has argued that Iran will seek to maximize its power, and its highest value “ask” is for the US to withdraw forces across the region.
Finally, I beg to differ with our esteemed Auerlien on his view of the UNSC resolution in Paragraph 14. His view had been, Third, the Iranian reference to the UNSC is probably intended to politically embarrass the US, rather than achieve anything concrete.” IMHO, following Pape, this is very important symbolically, given that Iran was on the receiving end of not just one but three attempted UNSC votes, the first passed, with a record number of co-sponsors which condemned Iran for “egregious attacks” with no mention that it was the US and Israel that had started this fight. This is a Steve-Jobs-returns-to-Apple level geopolitical statement, in the form of official statement (if also strictly speaking, symbolic) that Iran had been in the right all along.
The press is taking different postures in their headlines about the status of the MOU. Only some are making clear that this “deal” has a long way to go to get done:
From the Washington Post:
USA Today is astonishingly non-informative:
The Wall Street Journal does USA Today one better by not even putting anything about “the deal” above the fold:
Fox by contrast applies porcine maquillage heavily:
The Financial Times makes “the deal” its lead item:
And from BBC:
Bloomberg, which has consistently peddled every bit of deal hopium, refreshingly does a good job of cataloguing how far it falls short of US/Israel aims, as well as Trump’s new and improved barker patter. deal cheerleading:
From its text:
President Donald Trump and his team had several red lines that they used to justify the US war against Iran. At a press conference on Wednesday, Trump largely brushed them aside.
Explaining his decision to agree to an interim peace deal, Trump repeated his insistence that the country would never get a nuclear weapon. Yet he went on to suggest that Iran should have the right to enrich uranium, be allowed to develop ballistic missiles and get access to billions of dollars in frozen funds.
Those three things have been at the center of the debate around how to approach Iran for years, dating to the 2015 agreement that the US, under President Barack Obama, and other great powers signed with Iran to limit its nuclear program….
To be sure, he [Trump] has a history of taking a hard stance only to reverse it days — sometimes even hours — later….
But there was plenty in the press conference that surprised even the president’s supporters.
Take Iran’s ballistic missile program…Defense Secretary Pete Hegseth said the US objective was to “destroy the missile threat” posed by Iran.
Trump shrugged off that idea…He even derided those offering him advice — he referred to them as “guys I like” — as focusing on the wrong thing with the fixation on ballistic missiles. “I mean, they have to have some because other people have some,” Trump said.
“Missiles aren’t the problem,” Trump told reporters. “They hurt a little location but they don’t blow up the planet.”
The president took the same approach with nuclear enrichment. For years, he and many Republican critics of Iran have questioned why it should be allowed to enrich uranium if, as it insists, it doesn’t want a nuclear weapon. Secretary of State Marco Rubio told Fox News in May that Iran needs to “walk away from enrichment.”
With Rubio standing right behind him on Wednesday, Trump made clear he no longer agreed.
“It’s a little hard when other people have it, other adjoining states have it, and you’re not letting them have it for purposes of electricity and things like that,” Trump said. “You have to use a little common sense.”
The third red line Trump crossed centered on Iran’s frozen assets. The country has billions of dollars in overseas accounts that the US has blocked banks from releasing. Part of the justification for years has been that Iran is a leading state sponsor of terrorism, funding proxy groups such as Hezbollah in Lebanon and Hamas in Gaza, and can’t be trusted not to do so again.
“It’s not our money, it’s their money — and we froze it at a certain point in time,” Trump said. “I guess we’re going to have to give it back, you know. If we didn’t give it back, nobody would ever invest in the dollar again.”
The Wall Street Journal landing page story, Trump Signs Iran Deal, Says He Wants to Avoid ‘Economic Catastrophe’, highlights why Trump folded:
Trump—who in an unexpected move signed the deal Wednesday in Versailles—said he was influenced by the stock market’s rise as he worked toward a resolution of the conflict. He said he didn’t want to be compared with former President Herbert Hoover, who was president during the 1929 market crash that led to the Great Depression.
“He was always the one I didn’t want to be,” Trump told reporters at the Hôtel Royal where he and other world leaders gathered for the Group of Seven meeting. “I didn’t want to see an economic catastrophe.”
The Journal adds that an initial day negotiation session will start in Switzerland on Friday and that Trump does not see the 60 day timeframe as cast in stone.
Oddly, the Journal did not mention the key consideration that led Trump to relent, and one we have been banging on about from some time, that of the coming energy cliff. From The Hill in Trump says oil reserves would run out in 4 weeks without Iran deal, risking ‘bedlam’:
President Trump said Wednesday that oil reserves could have run out in four weeks if the Strait of Hormuz were not opened.
“We run out of reserves at about four weeks,” Trump said in France while at the Group of Seven summit, discussing the recent memorandum of understanding with Iran. “You know, there are reserves all over the world, and we would really run out, and there’ll be a time when you wouldn’t be able to get it.”
He said it would be “bedlam” if the oil ran out.
“What this does is it allows the ships to go,” he said of the Iran deal. “If we keep bombing, those ships won’t be going.”
It’s not entirely clear whether Trump was referring to U.S. or global oil inventories. The White House declined to elaborate, referring The Hill back to Trump’s original remarks.
The “four weeks” is squarely in line with the July timeframe we have been discussing for when the oil cliff will arrive. Even though, as Jeff Currie (and our own reader vao) pointed, out, the ending of the dueling blockades will allow tankers bottled up in the Gulf to deliver their cargoes, that only provides a week to ten days of supply (note that the more Trump was accurate that the US was able to sneak a lot out under Iran’s nose, the less will be transiting out soon). So the cliff is still operative and Trump will be very eager not to have Iran make a precarious situation worse by closing the Strait of Hormuz again, with Israel intransigence the most likely trigger.
In a talk shortly before the Administration released the final language, Robert Pape described long form not only why the MOU was a US capitulation but also the energy cliff still being in play meant Iran was ideally positioned to extract more concessions over the negotiation period:
Aljazeera’s live feed at the top says Israel is not complying with the MOU:
- US President Donald Trump and Iran’s President Masoud Pezeshkian have electronically signed a memorandum of understanding to end the US and Israel’s war on Iran.
- Israeli forces continue military operations in Lebanon despite its inclusion in the US-Iran MoU.
And:
⚠️ Breaking: Israel has carried out a drone strike Kfar Tebnit, Lebanon in violation of Iran-US MoU.
— Ehsan Safarnejad (@Safarnejad_IR) June 18, 2026
Israeli minister Ben-Gvir insists Israel will continue full-force operations in southern Lebanon:
Israeli National Security Minister Ben-Gvir:
We cannot stop destroying houses in southern Lebanon. We cannot stop, period.
We cannot allow the population of southern Lebanon to return. … We must continue to control the territory even if Trump disagrees.
We are an… pic.twitter.com/vhHo7K1Ttv
— Clash Report (@clashreport) June 17, 2026
Admittedly, it is possible that Israel will leave Lebanon the hard way, by being expelled, as opposed to Iran dropping the hammer by closing the Strait of Hormuz again:
Hezbollah is currently decimating the remains of the Israeli occupation in southern Lebanon. Dozens of Israeli terrorists injured and at least 2 killed today. Nonstop Hezbollah attacks in the south now. If the IOF don’t leave in the ceasefire, they will leave in coffins.
— Hadi (@HadiNasrallah) June 18, 2026
On the economic front, Jeff Currie is doubling down on his call for much higher oil prices:
_____
1 Via DropSite News:
📌 Islamabad Memorandum of Understanding between the United States of America and the Islamic Republic of Iran.
The text of the MOU, as read out loud on a conference call with reporters, including from NYT and The Hill, on Wednesday:
🔹Paragraph 1
The United States of America and the Islamic Republic of Iran and their allies in the current war by signing this M.O.U. declare the immediate and permanent termination of military operations on all fronts, including in Lebanon, and undertake from now on not to initiate any war or any military operation against each other, and to refrain [from] the threat or use of force against each other and ensuring the territorial integrity and sovereignty of Lebanon. The final deal will confirm the permanent termination of the war on all fronts, including in Lebanon and other provisions of this paragraph.
🔹Paragraph 2
The United States of America and the Islamic Republic of Iran undertake to respect each other’s sovereignty and territorial integrity, and to refrain from interfering in each other’s internal affairs.
🔹Paragraph 3
The United States of America and the Islamic Republic of Iran commit to negotiating and achieving the final deal in maximum 60 days extendable with mutual consent.
🔹Paragraph 4
Immediately upon the signing of this M.O.U., the United States of America will begin the removal of its naval blockade and any disturbances or impediments against the Islamic Republic of Iran, and will fully end the naval blockade within 30 days. During this period, the traffic of vessels will be in proportion to the numbers of prewar traffic being restored by the Islamic Republic of Iran. The United States of America further undertakes to remove its forces from the proximity of the Islamic Republic of Iran within 30 days after the final deal.
🔹Paragraph 5
Upon the signing of this M.O.U., the Islamic Republic of Iran will make arrangements using its best efforts for the safe passage of commercial vessels with no charge for 60 days only from the Persian Gulf to the Sea of Oman, and vice versa. The traffic of commercial vessels will immediately start, and considering the need for removing the technical and military obstacles and demining by the Islamic Republic of Iran, will be instated within 30 days. The Islamic Republic of Iran will conduct dialogue with the Sultanate of Oman to define the future administration and maritime services in the Strait of Hormuz, in discussion with other Persian Gulf littoral states in line with the applicable international law and the sovereign rights of coastal states of the Strait of Hormuz.
🔹Paragraph 6
The United States of America undertakes with regional partners to develop a definitive, mutually agreed plan with at least U.S.D. 300 billion for the reconstruction and economic development of the Islamic Republic of Iran. The mechanism for the implementation of this plan will be finalized as part of a final deal within 60 days. All required licenses, waivers and permissions needed for the relevant financial transactions will be granted by the United States of America.
🔹Paragraph 7
The United States of America undertakes to terminate all types of sanctions against the Islamic Republic of Iran, including the United Nations Security Council resolutions, I.A.E.A. Board of Governors resolutions, and all unilateral U.S. sanctions, primary and secondary, in an agreed-upon schedule as part of the final deal. The Islamic Republic of Iran and the United States of America acknowledge the critical importance of the sanctions termination issue above mentioned, and express their intentions to immediately address these issues in the negotiations in order to achieve mutual agreement on them.
🔹Paragraph 8
The Islamic Republic of Iran reaffirms that it shall not procure or develop nuclear weapons. The United States of America and the Islamic Republic of Iran have agreed to resolve the disposition of stockpiled, enriched material pursuant to a mechanism that will be mutually agreed upon in accordance with the schedule mentioned in Paragraph 7, with the minimum methodology to be down-blending on site under the supervision of the I.A.E.A. The two parties also agreed to discuss the issue of enrichment and other mutually agreed matters related to the Islamic Republic of Iran’s nuclear needs, based on the statutory framework being agreed upon in the final deal. The final deal will confirm the provisions of this paragraph. The United States of America and the Islamic Republic of Iran acknowledge the critical importance of the nuclear issues above mentioned, and express their intention to immediately address these issues in the negotiation in order to achieve mutual agreement on them.
🔹Paragraph 9
Pending the final deal, the United States of America and the Islamic Republic of Iran agree to maintain the status quo. The Islamic Republic of Iran will maintain the current status quo of its nuclear program, and the United States of America will not impose any new sanctions, and will not deploy additional forces in the region.
🔹Paragraph 10
The United States of America undertakes that immediately upon the signing of this M.O.U., and until the termination of sanctions, U.S. Department of Treasury will issue waivers for the export of Iranian crude oil, petroleum products and derivatives, and all associated services, including banking transactions, insurances, transportation, etc.
🔹Paragraph 11
The United States of America undertakes to make fully available for use the frozen or restricted funds and assets of the Islamic Republic of Iran upon the implementation of this M.O.U. The United States of America and the Islamic Republic of Iran will mutually agree on the procedures related to the release of these funds during the negotiations. Such funds, whether retained in the original account or transferred, shall be made fully usable for payment to any ultimate beneficiary designated by the Central Bank of the Islamic Republic of Iran. The United States of America undertakes to issue all necessary licenses and authorizations accordingly.
🔹Paragraph 12
The United States of America and Islamic Republic of Iran agree that an executive mechanism will be established to monitor the successful implementation of this M.O.U. and the future compliance of the final deal.
🔹Paragraph 13
After signing this M.O.U. and subject to the beginning of the implementation of Paragraphs 1, 4, 5, 10 and 11 of this M.O.U., and the continuing implementation of these measures, the United States of America and the Islamic Republic of Iran will start negotiations regarding the final deal exclusively on the other paragraphs.
🔹Paragraph 14
The final deal will be endorsed by a binding U.N.S.C. resolution.
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