The U.S. Middle East strategy risks turning into a political defeat

EUR/USD

Key zone: 1.1600 - 1.1650

Buy: 1.1680 (on strong positive fundamentals); target 1.1800-1.1850; StopLoss 1.1620

Sell: 1.1550 (on a confirmed break above 1.1600); target 1.1400-1.1350; StopLoss 1.1620

The military campaign that Trump hoped to turn into a quick foreign policy victory is increasingly showing signs of becoming a long-term strategic problem. Despite Iran’s significant economic and military losses, Tehran retains key levers of influence and, over time, may ultimately extract more political dividends from the conflict than its opponents.

The main declared objective of the operation — restricting Iran’s nuclear program — remains unmet. Moreover, Tehran continues to demonstrate minimal willingness to make meaningful concessions on this issue.

Iran’s continued control over the Strait of Hormuz, as well as the resilience of its existing political and religious governance system, significantly limits Washington’s ability to transform tactical military successes into a full-scale geopolitical victory.

Reminder:

During his campaign for a second term, Donny promised to avoid prolonged foreign military interventions. However, the United States has become involved in a conflict capable of inflicting serious damage on both his international reputation and his domestic political standing.

The military operation has now lasted twice as long as the six-week period Trump outlined after the U.S. joined Israel’s actions on February 28. Although the political core of MAGA supporters initially backed the military campaign, the Republican Party’s position in Congress remains vulnerable.

Against the backdrop of another round of high-profile political statements, the situation currently looks as follows:

• Trump claims that the Strait of Hormuz will reopen immediately after the signing of a preliminary framework agreement, while a final deal may later include the transfer of Iran’s enriched uranium stockpiles to the United States.
• The Islamic Revolutionary Guard Corps (IRGC), by contrast, insists that Iran will retain control over the Strait of Hormuz.
• According to Tehran, Iran’s economic recovery is expected to be financed, among other sources, through transit fees collected for passage through Hormuz.
• The Iranian side proposes postponing discussion of the nuclear program and uranium stockpiles to the next stage of negotiations.
• Washington demands the reopening of the Strait of Hormuz before lifting sanctions and is prepared to unfreeze only around 25% of Iranian assets — although, judging by current rhetoric, such an option appears acceptable to Tehran.
• The mechanism for resolving the “nuclear issue” remains unclear. Iran continues to insist that discussions are only possible after hostilities end, shipping through Hormuz is restored, port restrictions are lifted, overseas accounts are unfrozen, and compensation issues are addressed.
• Tehran has not yet confirmed either meaningful progress in negotiations, the likelihood of signing a framework agreement, or readiness to lift the blockade of the Strait of Hormuz. Official comments remain limited in substance.

What does this mean for markets?

At present, the most likely scenario appears to be the signing of a short-term framework agreement within the coming weeks.

For financial markets, the issue of Iran’s uranium reserves currently plays a secondary role. Far more important is the likelihood of reopening the Strait of Hormuz and restoring stable energy supplies — this factor alone could quickly reduce the geopolitical risk premium embedded in commodity prices.

An additional challenge for Trump is the need to negotiate with a new generation of Iranian leadership, viewed as tougher and less inclined toward compromise.

At the same time, risks of deteriorating relations with European allies are increasing, as many of them have refused to actively support the American strategy.

For Europe, the situation also remains difficult: the region is once again facing a combination of slowing economic growth and rising prices caused by the energy shock surrounding Iran.

European authorities continue searching for a balance between economic support and fiscal discipline.

In the currency market, EUR/USD maintains a bullish opening gap and remains near the 1.1650 level, supported by declining demand for the U.S. dollar as a safe-haven asset amid cautious optimism surrounding a possible agreement between the United States and Iran. However, further strengthening of the pair directly depends on confirmation of real progress in negotiations.

So we act wisely and avoid unnecessary risks.

Profits to y’all!