Iran hardliners escalate war as Brent crude tops $88

After President Trump signed a memorandum of understanding with Iran on June 17 at Versailles, administration officials fanned out to build support for an agreement they hoped would reopen the Strait of Hormuz and wind down the war. Iran's hard-line leaders, according to Iranian and Arab officials, concluded the pact was a U.S.-Israeli attempt to ease pressure on the global economy and buy time for a bigger attack. Instead of trusting the talks, they spent the past two months preparing for a larger fight.

"There is also a widespread view in Iran that the main war has not yet begun," said Mohammad Hassan Sangtarash, a Tehran-based defense analyst close to the Iranian government. "What we have seen so far is increasingly interpreted through the lens of 'salami-slicing' tactics—limited, incremental escalation designed to weaken capabilities before a larger confrontation."

The preparations include giving the Islamic Revolutionary Guard Corps, an armed force nearly 200,000 strong, more control over the regular army, appointing hardened veterans of the 1980s war with Iraq to key posts, expanding domestic counterintelligence and ramping up missile and drone production. The leadership quickly seized the initiative, attacking ships to tighten Iran's grip on Hormuz—through which about 20 percent of the world's oil supply passes—and expanding the battlefield to the Red Sea, which Saudi Arabia has used to bypass the Persian Gulf chokehold.

Brent crude, the international benchmark, rose $4 in the past week to more than $88 a barrel on Friday, while West Texas Intermediate traded near $81, up from less than $70 in February but below its April peak above $110. U.S. gasoline averaged $4.07 a gallon, compared with $3.16 a year earlier, according to AAA. Iran has struck six United Arab Emirates ships over the past two weeks as they tried to transit Hormuz, and fired five ballistic missiles at Jordan during a lull in the conflict, two weeks after another strike killed three U.S. service members. Seventeen U.S. military personnel have died since the war began in late February.

A leadership reshaped for confrontation

Behind the scenes, Supreme Leader Mojtaba Khamenei has positioned his forces for a more aggressive fight, unveiling a reorganization a week ago that lined up seven key security leaders to run revamped military and repression institutions. Mohsen Rezaei, who led the Guard during the war with Iraq in the 1980s, was named secretary of the Supreme National Security Council, where he will be Khamenei's representative; in the past week the council squelched progress on a deal to gradually reopen Hormuz. Khamenei returned veteran Hossein Taeb, who led a deadly crackdown on protests in 2009, to the helm of the Basij militia with a mandate to build a "popular intelligence network." Guard Commander in Chief Ahmad Vahidi was formally given his post with orders for "powerful offensive operations against the enemy."

"We took full advantage of the ceasefire period," Guard spokesman Brig. Gen. Hossein Mohebbi said in an interview with the Guard-affiliated Tasnim news agency in July. "We enhanced our capabilities, accelerated our missile production rate and improved missile accuracy."

The Guard has coordinated with allied militias in Yemen and Iraq to widen the battlefield. Intercepted communications show the Guard sending commanders to Houthi-controlled areas of Yemen to plan a stepped-up confrontation with Saudi Arabia, providing target lists including Saudi ports and energy facilities. The Houthis have declared the Bab el-Mandeb Strait closed to Saudi Arabia and struck the port of Mokha, killing at least 11 people on Aug. 9, while Saudi crude shipments through the Red Sea increasingly vanish from tracking systems as tanker operators switch off their Automatic Identification Systems.

A widening supply risk

For the regime, "the baseline is war," said Alan Eyre, a former senior U.S. diplomat and nuclear negotiator with Iran. "Iran will remain on a wartime footing, preparing for a subsequent attack."

The divergence between Washington's and Tehran's perceptions has driven a hard-line negotiating stance that has flummoxed Trump, who has called Iran's leaders "sick" and "scum." Mediators said Iranian diplomats agreed early this month on a deal with Oman to oversee routes through Hormuz, but the Guard blocked it and returned to attacking ships. With talks stalled, Trump has stepped back to see whether sanctions and the Navy's blockade soften Iran's position, while Treasury Secretary Scott Bessent has threatened "economic isolation like the world has never seen before."

The last time oil supply risk from the Gulf spiked this sharply, in April when the war began, Brent surged above $110 a barrel before retreating; the current escalation suggests the risk premium is rebuilding. Iran's leaders are slipping into a survival economy aimed at holding out, and people close to the top negotiators warn peace talks could be only an interlude. "Iran is prepared for the great confrontation," said Mehdi Mohammadi, a strategic adviser to chief Iranian negotiator Mohammad Bagher Ghalibaf. If the Guard keeps attacking shipping, Gulf states that have backed even unfavorable deals to reopen Hormuz face extended disruption to energy supplies and further pressure on global crude prices.

This article is for informational purposes only and does not constitute investment advice.