The monthlong ceasefire between the United States and Iran is teetering on collapse after Tehran rejected Washington’s latest proposal, prompting President Trump to warn that a return to major combat operations is being seriously considered. With the Strait of Hormuz still effectively closed, oil prices hovering near $106 a barrel, and negotiations mired in mutual distrust, the path to a durable peace agreement has rarely looked narrower. American consumers are absorbing a mounting financial toll, and policymakers across the world are bracing for the consequences of a potential resumption of hostilities.
Story Highlights
- Trump called Iran’s counterproposal “totally unacceptable,” and administration officials say resumption of major combat is now more seriously under consideration
- Brent crude oil remains near $106 per barrel, roughly $20 above pre-war levels; average US gas prices are $4.52 per gallon nationally
- Iran’s counterproposal demanded recognition of sovereignty over the Strait of Hormuz and compensation for war damages — terms the US flatly rejected
What Happened
President Trump said the ceasefire between the US and Iran is on “massive life support.” The latest response from Iran, which Trump has deemed both “totally unacceptable” and “stupid,” has led several officials to question whether Tehran is willing to take on a serious negotiating position.
Tehran’s counterproposal to the United States’ plan to end the war included recognition of sovereignty over the blockaded Strait of Hormuz and a demand for compensation for war damages. The proposal demands the release of frozen Iranian assets as well as the lifting of sanctions. From Washington’s perspective, those terms amounted to a demand for American capitulation rather than a good-faith opening bid.
Trump has grown increasingly frustrated with how the Iranians are handling negotiations to end the war. Some Trump aides say that he is now more seriously considering a resumption of major combat operations than he has in recent weeks. Trump has grown impatient with the continued closure of the Strait of Hormuz, as well as what he perceives as division in Iranian leadership that is preventing them from making substantial concessions on nuclear talks.
National Security Advisor Mike Waltz signaled the administration’s dual-track posture publicly, saying that while Trump wants to focus on diplomacy and is “giving diplomacy every chance that he can before going back to hostilities,” the military option remains fully on the table. The administration has maintained that Iran will never be permitted to develop a nuclear weapon.
The US war against Iran has cost $29 billion so far — an estimate that is higher than the $25 billion figure the Pentagon provided to Congress two weeks ago. Negotiations are being mediated by Pakistan, with Saudi Arabia and Egypt facilitating backchannel dialogue, and China’s role is being watched closely for whether it will exercise influence on Tehran.
Why It Matters
The Iran conflict has moved from a sharp military campaign into an increasingly complex diplomatic standoff, and the stakes for the American public are growing by the day. The war, which began on February 28 and is now in its eleventh week, has cost more in both financial and human terms than initially projected, and its end remains unclear.
American consumers are facing a $37 billion hit from the spike in gasoline and diesel prices since the war with Iran started. That increase in costs amounts to more than $284 per household, based on the Iran War Energy Cost Tracker from Brown University, which tallies the extra cost for gasoline and diesel since the war started.
The geopolitical consequences extend well beyond energy prices. Israel has expressed concern that the US could strike a deal with Tehran that leaves Iran’s nuclear program partially intact. A deal that leaves Tehran’s nuclear program partially intact while bypassing issues such as ballistic missiles and support for regional proxies would lead to Israel viewing the war as incomplete. One source familiar with the discussions said that Israel understands the missiles and the proxies “are probably off the table” as they do not appear to be included in early diplomatic drafts.
That gap between the administration’s original war aims and what appears achievable through negotiation is a central tension shaping the current impasse. Trump entered the conflict declaring the US wanted to destroy Iran’s ballistic missile program, end its support for regional proxies, and permanently close its path to a nuclear weapon. The current negotiations appear to have narrowed considerably to uranium enrichment levels and reopening the Strait.
Economic and Global Context
The Energy Information Administration’s forecast assumes the Strait of Hormuz will “remain effectively closed through late May.” The EIA expects traffic to resume in June but only “gradually” and not return to normal until the end of the year. Officials expect Brent crude oil to remain near $106 a barrel in May and June, compared with around $70 before the war started.
That sustained price pressure is feeding into inflation data, complicating the Federal Reserve’s monetary policy calculus and adding to cost-of-living pressures already elevated by prior tariff rounds. Trump floated the idea of suspending the federal gas tax as a short-term measure to ease consumer pain, a step that would require congressional action.
China’s position in the conflict is economically and strategically significant. Beijing relies heavily on oil flowing through the Strait of Hormuz, giving it a direct material incentive to help broker a resolution. At the Beijing summit, Xi told Trump he wants the waterway open and expressed interest in purchasing more US oil to reduce dependence on Middle Eastern crude. Whether that shared interest translates into actual Chinese diplomatic pressure on Iran remains to be seen.
The war’s cost to the US military budget — now acknowledged at $29 billion and rising — adds further strain to a federal balance sheet already under pressure from the tax cuts enacted under last year’s One Big Beautiful Bill. Defense economists are beginning to flag the cumulative fiscal cost of sustained engagement, and Congress will face difficult appropriations decisions in the months ahead.
Implications
There are different camps within the administration recommending alternating paths for how to proceed. Hardliners are pushing for a swift resumption of strikes to force Iran’s hand. Diplomats and some senior officials are urging patience, arguing that sustained pressure through the blockade and continued mediation may eventually yield a workable agreement.
The decision Trump makes in the coming days or weeks will define the trajectory of his second term in ways that few other choices can match. Resuming combat risks significant escalation, potentially drawing in other regional actors and pushing oil prices even higher. Accepting a weak deal, on the other hand, would expose him to withering domestic and allied criticism over the gap between his war aims and the actual outcome.
Pakistan’s role as mediator will be tested in the near term. Iranian Foreign Minister Abbas Araghchi attended the BRICS summit in New Delhi, where the Saudi and Egyptian foreign ministers were also present — a setting that offers informal diplomatic channels operating in parallel to official negotiations.
For American voters, the clearest measure of the conflict’s progress will be gas prices. If the Strait reopens and oil returns toward $70 per barrel as the administration has promised, that will be a politically powerful outcome. If prices remain elevated through the summer driving season, the Iran conflict could overshadow every other domestic priority heading into November’s midterm elections.
Source
Trump says China’s leader offered to help end the war with Iran
