[Today’s Iran war, as usual, fired a bit early. Please return at 7:30 AM EDT for a final version]
As most of you know well, Trump again TACOed over the weekend, calling off a loudly-broadcast, supposedly monster attack on Iran at the very last minute, in yet another instance of Trump being influenced by the last person who spoke to him. Recall we and many others warned that Trump was likely to Do Something after meeting Netanyahu and being surrounded by hawks at Linsey Graham’s funeral. After making yet another in a long series of threats of devastating Iran, Iran not only cleared its throat and reminded the US and Israel that petrostate energy infrastructure would be obliterated, but published a target list with notes for the Trump dummies as to why they mattered.1 And to make sure this communication landed. Iranian Foreign Minister called key Gulf State leaders. As Axios first reported, MBS called Trump to get him to stand down. The Wall Street Journal later provided more detail, including that the UAE was still pumping for the strikes.
As of course, Trump is again remarkably fronting the bogus line that Iran is begging for a deal. Forgive me for placing so much emphasis on headlines, but they have strong influence on how readers process the rest of the article….charitably assuming any more is read:
There is no mention in the article that Iran has not agreed to talks. You have to go to Aljazeera to have a clue:
And from its live feed:
A recap of remarks by Iran FM spokesman Baghaei
There are currently no negotiations with the United States, and Iran is not planning to send or host delegations “these days”.
Negotiations are ongoing, and progress has been made with Oman to secure a temporary passage through the Strait of Hormuz.
Reaching an agreement with Oman is not sufficient to reopen the strait; the situation will remain unchanged if US “aggression” continues.
China is concerned about “the escalation of conflict and insecurity in the region” and is trying to prevent the situation from escalating.
There is no new mediator in talks with the US, with Pakistan and Qatar carrying out the duty.
The US-Israeli war on Iran is not just a war against one country; it is “a war against the entire region”.
The situation in Yemen is not related to the war on Iran, and linking any issue to the war is “a form of evasion of responsibility”.
And from the Financial Times:
Note the subhead is a misrepresentation. Yes, Iran has said it is close to reaching an understanding with Oman about the future management of the Strait of Hormuz. But that no way, no how means the Strait of Hormuz will be “open” any time soon. See the landing page at Press TV:
Note the headlines:
Iran-Oman shipping understanding no green light for Hormuz reopening: Baghaei
Claims of Iran agreeing to reopen Hormuz Strait are false: Report
A high level view:
“I was gonna attack Iran and win again, but our allies said please Mr Trump, stop, it’s too much winning, we can’t take it anymore.” https://t.co/Z7sK3Owvnl
— MenchOsint (@MenchOsint) August 2, 2026
Even the Wall Street Journal signals a smidge of skepticism in its lead story, including editorializing via an unflattering photo:
From the body:
After days of threats to launch a new offensive against Iran, President Trump is once again trying to achieve through diplomacy what he has yet to accomplish through war.
The question is whether Trump’s Gulf partners can make enough headway in the days ahead to reopen the Strait of Hormuz to shipping, at least temporarily, and lay the groundwork for eventual nuclear talks….
Still, if talks falter as they have in the past, Trump could once again fall into a familiar cycle of reviving his military threats shortly after he shelved them.
“He is trying his hand now at a diplomatic solution to avoid military escalation. But there’s no clear path, either diplomatically or militarily, to get Trump to a place where he can declare victory,” said Vali Nasr, an Iran expert at Johns Hopkins University.
Policy Tensor on Twitter puts it more pointedly
The extreme mendacity and total lack of credibility of the US Administration is self-defeating. It makes it dramatically harder to conduct either coercive diplomacy or find an off-ramp.
Coercion is harder because Iran has learnt not to believe US threats. Finding an off-ramp is harder because Iran has learnt not to believe US promises.
However, I do not agree that there is no military solution for Iran. It is pushing the US out of the region. The US is running out of munitions and cannot hope to restore stocks in any time frame that will change the direction of travel. And Iran can and will destroy the global economy if the US tries a big, savage attack.
Regarding the Journal’s newfound skepticism, perhaps word is getting out that Iran is not bothering to play nicely when Trump revives his tired peace talks gimmick. From NO1’s latest update:
Tankers still targeted in the “deal” corridor. UKMTO/Ambrey logged an explosion ~20nm NE of Khasab, Oman (MoloWarMonitor, ZH); the VELOS AMBER transited the US-backed corridor under heavy air escort but was fired on by at least one projectile (MenchOsint). Not the behaviour of a side “begging for a ceasefire.”
Sadly, this “deal are on again” barker talk is still effective enough to sway Mr. Market and preserve the Trump delusion that his is a Colossus, astride the world, driving all events.
But to step back: Iran is implicitly operating on the old Teddy Roosevelt maxim, “If you have them by the balls, their hearts and minds will follow.” But the energy/critical commodities squeeze has not yet become acute enough to imperil Trump’s manhood. Various Twitterati claim that Iran won’t consider negotiations2 until oil has reached $120 a barrel.
Trump, as John Mearsheimer is flailing about, falling back on well-established reflexes that if he punches out aggressively in enough directions, he at least buys time time and eventually changes the dynamics in ways that help him. No such outcome is possible here. as we have repeatedly said, time is not on Trump’s side:
Bessent is smart enough to know that you can’t kill oil prices unless you kill the backwardation in the curve.
And you can’t kill backwardation unless you have the barrels.
The US can announce another unilateral SPR release and let’s say that 70 million bbls is the minimum.… pic.twitter.com/FnfUvVWl6P
— HFI Research (@HFI_Research) August 3, 2026
The rest of the text of the tweet:
That’s another 200 million bbls.
But the release rate is throttled down to 0.5-0.6 million b/d.
That’s not enough to kill backwardation.
The barrels that were trapped in the Middle East have been released already, so there’s no more immediate supply he can use to dump on the market.
Clock is ticking.
But Trump may think he has runway well beyond the midterms, between running the SPR down to 70 million barrels and the diesel crunch only gradually becoming acute. HealthRanger is seeking to raise alarms, but look at his implicit timeline. From Twitter:
It’s getting worse. Diesel rationing is right around the corner.
Shell CEO Wael Sawan just appeared on CNBC, and while using diplomatic language to sound calm and optimistic, what he actually admitted is that there’s not enough diesel being produced to meet demand.
A direct quote: “The price signals are that we are short on diesel and gasoline…”
My own research says we can power through the gasoline shortage, but diesel shortages will worsen. At first, even in the USA, this will only mean higher diesel prices ($8 – $10 per gallon is where this is headed). But later this year, if oil shipments out of the SoH are not fully resuming (which seems impossible), we will almost certainly encounter a situation of “rationing” that won’t be called rationing.
There will be scarcity, and allotments for various fuel distributors, in other words, and never enough diesel to go around.
I probably don’t have to tell you how this is going to impact food prices and deliveries, agriculture and food harvesting, construction, long-haul trucking, delivery of parts for hardware supply stores, trains / locomotives, etc. Basically EVERYTHING gets more expensive and delayed. Supply chains erode. Food inflation skyrockets.
And this is the Shell CEO trying to downplay everything and sound optimistic, notably. Imagine what he’s saying to his employees in private…
Prepare for things to get much, much worse. Trump still doesn’t realize you can’t bomb your way to victory against Iran. And he still thinks the Strait of Hormuz can be controlled by the US Navy (a laughable, ridiculous assertion).
The coming diesel shortages are only part of the problem, of course: Fertilizer shortages, helium, sulfuric acid, polyethylene feed stock, etc. If we don’t end this war and see the SoH resume shipping, our world will enter a multi-year economic Dark Age. Not just a depression, but a Dark Age of systemic collapse and despair (with starvation, violence, population collapse, mass human migration, etc., all following in short order).
“Later this year” is a mighty long time away for Trump.
And more important, Trump has made clear that his domination is all important, even if the result is epic scale destruction. He has shown no interest in moderating his tone or changing his policies to try to reverse the continuing fall in his popularity. The apparent decision to run down the SPR to the point where it destroys the salt caves is an “Après moi, le déluge” measure. He is likely to run down US munitions to what pundits would see as US-security-threatening levels in yet another doomed-to-fail effort to reassert personal potency unless the armed forces refuse to execute his orders.
The problem is that Trump is much more fundamentally trapped, not merely by the scale and ramifications of the strategic error of the war on Iran, the inability to force Iran to give up control of the Strait of Hormuz, and the revelation of US military fragility, but also his personality and the way key posts are now filled by incompetents and toadies.
Last week, in a talk with Nima, Larry Wilkerson, who has been reading US history in his surgery-related downtime, came close to saying that he saw Trump as unable to escape from his bad handiwork:
From a lightly-edited machine transcript:
I think I’m looking at is a situation where this particular president because of because of his own volition really is ensnared, is entrapped, is caught, use your verb, by a number of factors from which he which he cannot Nima, will not, cannot extricate himself.
The first one is the one confronting him in the war he started he started…He’s trapped there by a number of factors, not the least of which is we’re running out of ammunition…
But first of all, by the Strait of Hormuz, by the strategic importance still of that straight and the upper hand that Iran has with regard to that Strait.
And the second thing he’s trapped by other things too with regard to this conflict, but the second big thing he’s trapped by is his own problem, the nuclear program, because he created it. The moment he stepped out of the JCPOA in the violative of international law and even domestic law really way he did, he created this situation…So he’s trapped by the Strait and he’s trapped by the nuclear issue. neither of which he has the power, no matter how many bombs, if he had them, he dropped to change…
And Trump is trapped much more solidly and completely than LBJ ever was….Tge second thing I came to was this reality he is also trapped in his desire to resurrect the US presence in southwest Asia despite his losing this war and being virtually kicked out He’s trying to resurrect it through whom? The greatest state sponsor of terrorism on the face of the earth, one of the richest countries on the face of the earth, Saudi Arabia. And he’s trying to do it by sacrificing everything he’s fighting this war for in order to give them a nuclear program.
And he’s trying to do it. And guess who’s thwarting him in my view at this particular moment in that specific move?
The Houthis….
So that’s where he’s trapped in his latest attempt to stay in the region and to use the Saudis as a tool by which he stays in the region.
And then the third thing and this is very different very different from LBJ’s situation which I was sort of using as a comparison.
He’s trapped by Bibi and everything that means, Israel and Bibi. That’s domestic trap. Thank Miriam Adleson and other people like that and far more than her with regard to money and support of Israel. And he’s trapped internationally because of some prospective expansions of this conflict if he’s not very very careful.
And even if he’s very very careful, I think Israel’s fate is doomed. It’s sealed. It’s finished. It will not be a democratic state in Levant when all the fallout finishes. It might not even be extant because if this goes deeper and wider bringing in Turkey, bringing in ultimately China and Russia in a far more physical way, then we’re talking about Israel being gone, disappeared from the face of the earth.
And if it does survive, the only way it can survive is a genuine democracy that welcomes everyone into its borders and throws away the the sign that says this is a Jewish state.
And then the last thing I was looking at…Trump is unique. He’s not HW. He’s not George W. He’s not LBJ. He’s not Richard Nixon. He’s not uh Ronald Reagan. . So what you’re looking at here is him having very much trapped himself because of his political approach…
Win everything. Don’t lose anything at all. Win all the time.
Now that’s his personal attitude also. We’ve seen that in his business dealings and other things….
How does he win in this? And this requires the kind of person who can do what LBJ did for example which was seminal in his political career. He didn’t run again. He stepped down literally more in the sense of the republic and what it means to be a decent leader…So Trump is haunted here by his own political style from which he cannot retreat.
To put this in different anatomical terms, Trump will not chew off his leg to escape from his own trap.
Again, perhaps God will smite Trump as he did Lindsey Graham. Perhaps the military will refuse to execute his orders. But either way, something will break. Either Trump will keep flip flopping even as the economy starts to come apart, or he will try his overdue big attack.
As regulars also well know, in the event Iran and the US send each other more substantive communiques, Iran will increase its demands over what it had gotten in the MOU. Professor Marandi has said Iran will want the US to commit to Israel not just out of Lebanon but also Gaza and to exiting its bases in the Gulf States, Admittedly that is already close to being a fact on the ground.
From a surprisingly candid report from the Financial Times, Iran sets the pace in war with Trump, on the degree to which the Iran has the US on the back foot. Key sections:
Over the past two weeks, Tehran has taken the initiative, launching pre-emptive attacks designed to exhaust the US and frighten its Arab allies into acquiescing to Iranian control of the Strait of Hormuz.
It struck against an American military installation in Jordan, breaking a lull in the fighting last week with a surprise attack. Iran and its regional proxies have widened the theatre of conflict, disrupting shipping in the Red Sea, striking Syria for the first time and being suspected of a drone attack on Egypt….
“Iran is expecting a very long war,” said Nasr, adding that the regime no longer viewed a negotiated settlement as feasible. “They are following a very methodological strategy of forcing the US as far away from Iran as possible: out of the Gulf, Syria, Iraq, and having them holed up in Israel and Jordan.”
Iran has intensified strikes against Kuwait and Bahrain in recent weeks. It has forced Washington to reposition soldiers and airmen, who once relied on a necklace of vulnerable bases across the Gulf, further afield to Jordan, Israel and beyond.
There has been anger and frustration in Jordan, a stalwart American partner under heavy fire in recent weeks, where hundreds of activists and public figures signed an open letter demanding an American withdrawal.
The last paragraph is a bit desperate:
But there are factors beyond the battlefield. “They are not invincible,” said [Farzan] Sabet, of the Geneva Graduate Institute, noting that Iranian confidence can begin to erode as its already catastrophic economic outlook worsens. “There might well be a point where their calculus is forced to change.”
Some fresh sightings on US withdrawals:
🇺🇸🇮🇶 U.S. forces are reportedly continuing their withdrawal from Iraq’s Kurdistan Region.
The U.S. Army MIM-104 Patriot air defense battery previously deployed at Erbil International Airport, widely believed to have been hit during Iran’s missile/drone strikes last month, has… https://t.co/4MlfCkA9X6 pic.twitter.com/uLZxUNSrsO
— Egypt’s Intel Observer (@EGYOSINT) August 2, 2026
American, British, French and German forces have withdrawn hundreds of troops and key air-defense systems from Erbil International Airport in a surprise 72-hour pull-out that has left the Kurdistan Region badly exposed to intensifying Iranian and militia attacks, Rudaw…
— Rudaw English (@RudawEnglish) August 1, 2026
Reporter: There is a report that says you are moving U.S. troops out of Kuwait and Bahrain.
Trump: I don’t want to comment on that. pic.twitter.com/mcLxCMwZe2
— Clash Report (@clashreport) August 2, 2026
We covered in detail how the US and Qatar refused to cough up even $6 billion of Iran funds that the Biden Administration had agreed to release (they then reneged with October 7 as the pretext). Even Western commentators have worked out that, as Marandi has also said, Iran will demand its frozen funds back, up front. From Brett Erickson on Twitter:
What many seem to be missing about the potential joint-control over the Strait of Hormuz because Iran and Oman is that this is not the most significant measure anymore for Iran.
In all reality, it is extremely unlikely that Iran accepts any future deal that does not have IMMENSE asset unfreezing upfront. By many estimates, Iran has ~$100B-$120B of frozen assets held around the world.
Given the extent of the bombing damage and blockade damage, Iran will want to ensure this can be unwound as soon as possible, but more importantly, in an IRREVERSIBLE way.
Under the previous MOU, Iran’s only notable upfront concessions was the oil sanctions waiver. As we saw… that was not what one may call “durable”… as Trump ripped it up about two weeks into its 60-day authorized window. Iran will not accept such reversible concessions this time around.
While the Strait of Hormuz is certainly the most important symbolic victory for Iran, and could possibly earn more revenues over the long-term, the immediate benefit Iran would demand from ANY peace deal is the immense unfreezing of Iran’s assets.
Upfront. Before the blockade is lifted. Irreversibly.
I hate to tell you but there is not a universe in which this happens. Trump and the US Congress both would choose to cause a global depression rather than suffer this level of humiliation. So the only way out is if the US slinks away. But Israel will do its best to block that exit.
The Israelis are hopping mad that Trump reversed himself at the last minute:
Thousands of Israeli military and defense personnel maintained readiness this weekend following US warnings of a pending American strike on Iranian infrastructure, only for President Trump to cancel the operation at the last minute. Israeli security officials strongly criticized…
— Faytuks Network (@FaytuksNetwork) August 2, 2026
Brandon Weichert reports that Israel sources have told him that the TACO is only temporary, the US and Israel will “go back in” (at 49:45). Janta Ka reported that the US has moved ten more refueling tankers into the theater.
It appears Israel has not gotten the memo that Dimona is on the menu:
🇮🇷 🇮🇱 NEW: Iran has reportedly added Israel’s Dimona nuclear facility to its list of potential targets, warning that it could be struck within minutes—possibly before Israeli fighter jets are able to return to their bases.
— Jackson Hinkle 🇺🇸 (@jacksonhinkle) August 2, 2026
A new post on Sonar21, by Karl Miller, discusses in depth what Iran might hit in retaliation. Miller focuses on refineries as essential and vulnerable:
A major US-Israeli campaign against Iran would create a credible risk of retaliatory pressure against the most concentrated Israeli fuel systems first, followed by wider pressure against GCC refining, LNG, power-water, storage and export systems if those states are perceived as enabling the campaign. The strategic danger is not a single damaged facility. It is the possibility that several tightly coupled systems fail faster than substitute supply, repair capacity and emergency logistics can be mobilized….
Israel has no geographically diversified domestic refining system. Haifa/Bazan and Ashdod carry effectively the entire national burden for diesel and jet/kerosene production. The larger Haifa complex supplies approximately two-thirds of the combined middle-distillate baseline and roughly 70 percent of diesel. Ashdod is the only substantial domestic alternative if Haifa becomes unavailable.
Haifa/Bazan is the central Israeli fuel-security exposure because it combines the largest refining burden with interconnected support systems. A future disruption would not need to eliminate every crude or conversion unit to create a national deficit. Loss of electrical integration, steam, hydrogen, internal transfer, controls, tankage or product certification could constrain several process trains simultaneously.
We took note of Iran’s change in doctrine to allow for pre-emptive attacks. Given persistent US failure to consider how Iran operates, the officialdom must stoop to messaging:
JUST IN: 🇮🇷🇺🇸 Iran’s considers launching preemptive strikes if diplomacy with the United States fails.
— BRICS News (@BRICSinfo) August 2, 2026
Some odds and ends:
You will be denied visa to the US if you criticize Israel pic.twitter.com/Q37shFKM7D
— Glenn Diesen (@Glenn_Diesen) August 2, 2026
It is hard to take this seriously given that the UK is letting the US use its bases for Iran operations. Nevertheless:
⚡️⭕️ Iran: Foreign Ministry says Britain, Bulgaria, and Ukraine have informed Iran they will not participate in any war against Iran. (Al Mayadeen Breaking)
— Middle East Observer (@ME_Observer_) August 2, 2026
From Aljazeera’s live feed:
IRGC says it intercepts Reaper drone over Strait of Hormuz
Iran’s Islamic Revolutionary Guard Corps (IRGC) has shot down an MQ-9 Reaper drone flying over the Strait of Hormuz, according to the IRGC-operated Sepah News.
The drone was hit by a defence system operating over the strait, the report said. It’s unclear where the unmanned vehicle originated, but Reaper drones are primarily operated by the US Air Force.
Iran has intercepted more than 30 US Reaper drones since the US-Israel war on Iran began on February 28.
⭕️ Ambrey Intelligence reports an incident in the US-backed corridor of the Strait of Hormuz.
Well, looks like IRGC is not keen to allow Trump even the slightest PR victory, not something you do if you’re “begging for a ceasefire..” https://t.co/1uaQZL926l
— MenchOsint (@MenchOsint) August 2, 2026
⚡️🚨 Digest — 10:15–13:15 UTC
LEAD: Washington Post reports (via multiple feeds) that the commander of US European Command, Gen. Alexus Grynkewich, has privately warned the Pentagon he lacks enough destroyers to simultaneously protect Israel from Iranian missiles and meet US…
— Middle East Observer (@ME_Observer_) August 1, 2026
More signs of desperation:
U.S. oil refineries are delaying maintenance and running at OVER 100% output through Q2 of this year.
If these refineries are not brought down for required maintenance very soon, they literally start to blow up and kill lots of workers.
There are MANY examples of this over the…
— HealthRanger (@HealthRanger) August 3, 2026
JUST IN: 🇺🇸🇮🇷 US military asks troops for “creative and unconventional” ideas to punish Iran, CNN reports.
— BRICS News (@BRICSinfo) August 3, 2026
Done for today! See you tomorrow!
____
1 In case you missed it:
🇮🇷 Iran has updated a list of potential targets in the event that the United States and Israel launch attacks on the country’s energy facilities and critical infrastructure.
▪️ The reported target list includes:
🇸🇦 Saudi Arabia: Ghawar Oil Field, Abqaiq facilities, and Khurais… pic.twitter.com/NDSYIbqNWv
— Raaz News – En (@raaznewsen) August 1, 2026
2 I share Aurelian’s sense of umbrage at calling what has been and is going on between the US and Iran as negotiations. They don’t even rise to the level of being talks. Exploratory notes run though mediators, and worse, often misrepresented by them, are not negotiations.
