Executive Summary
The MoU signed between Iran and the U.S. on 17 June unravelled in less than a month. Iran viewed Oman's southern shipping route as a direct breach of the interim deal and targeted three tankers using it in the Strait of Hormuz on 6-7 July. A day later, President Trump declared the MoU "over," and Tehran confirmed its suspension on 18 July.
Both sides have accused the other of never intending to honour the deal, with Tehran arguing Washington only signed to get oil flowing again.
The MoU's failure has hardened Iran's posture. Tehran is now set on securing its footing in the Strait of Hormuz through a bilateral deal with Oman granting it control over the entrance and part of the exit route, plus fees.
This hard bargain, coupled with demands for concrete American steps — including oil waivers, an end to the naval blockade, a halt to regional conflicts — has stalled resolution of this second round of conflict. Tehran's goal remains a return to the MoU with the Hormuz deal annexed to it, having first taught Washington there is no military solution to the Gulf impasse.
Domestically, Iran shows strain but no fracture. Militancy has resurfaced in Kurdish and Baluch regions, and the judiciary has sustained a rapid pace of executions to deter unrest, holding so far despite the risk of backfire.
The MoU's brief reopening brought a real, short-lived economic boost, before the renewed U.S. naval blockade erased most gains and the rial surrendered its recovery. Despite intensifying politicking, the risk of rupture between Iran's pragmatist executive branch and the hardline bloc remains limited: both agree force is the only path to bringing Washington to terms, differing only on dosage and duration.
Militarily, this round was largely confined to southern Iran and consequently proved less punishing on Iran's population than the first. Depleted munitions stocks are constraining the U.S. campaign, while Tehran's activation of the Houthis and Iraq's Popular Mobilisation Forces (PMF) adds muscle to its standoff with Washington. Together, these point toward a likely return to the MoU, almost certainly an MoU+ leaving Iran with genuine gains. What is less clear is whether that likely return holds or collapses again within months over recurring disputes.
Key risks: Iran delaying any MoU return until confident enough U.S. strain forecloses renewed strikes, a wager that could just as easily prolong the conflict; the Hormuz fee and lane-control dispute hardening into a lasting sticking point; Houthi and PMF actions outpacing Tehran's control; renewed internationalisation risk via Ukraine-linked incidents or infrastructure strikes; and the U.S. seeking to revise the deal's terms or “finish the job” against the Islamic Republic, alongside an Israel that has so far held back for lack of a game-changing option.
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