During the Iran-Iraq War of the 1980s, the late Henry Kissinger would half-joke that he wished both sides could lose. That grim prediction has now come true for the US-Israel-Iran conflict that began in June 2025 with a 12-day bombing campaign against Iranian nuclear facilities and escalated on February 28 into a three-way war. When the US and Iran sign their framework deal in Switzerland on June 19, the reality will be that all three parties have lost.
The conflict descended into a bitter stalemate after an April 8 ceasefire that was meant to last two weeks but has held for over seven. The closure of the Strait of Hormuz sent crude oil prices soaring, but markets have now priced in a resolution, with oil falling back toward $80 per barrel—more than 25% below its early May peak. The mutual blockade of the strait by the US and Iran benefited no one, and none of the three countries has the strength to continue.
Iran: Surviving but Weakened
Iran's theocratic regime, which massacred tens of thousands of its own citizens during protests in January, may claim victory by simply surviving. It has shown more resilience than American and Israeli intelligence expected, with larger weapons reserves than realized. The regime remained intact despite the assassination of Supreme Leader Ayatollah Ali Khamenei and many top officials. Popular protests were silenced partly by repression and partly by the unifying effect of foreign bombs.
Yet strategically strong does not mean politically or economically stable. Inflation is higher than before the war, and living standards depend on peace. Iran's nuclear enrichment program has been largely destroyed, and its network of militias in Lebanon, Gaza, and Yemen is depleted. The country's ability to close the Strait of Hormuz has given it leverage but not long-term benefit.
Israel: Netanyahu's Gamble Fails
Israeli Prime Minister Binyamin Netanyahu wanted the war to continue, arguing that Israel cannot be safe while a theocratic regime dedicated to its destruction governs Iran. But his effort to dislodge that regime through American bombs has failed. His own government has collapsed: ultra-Orthodox parties withdrew over a conscription dispute, and the Knesset was dissolved on May 20, with elections expected in September.
Netanyahu remains aggressive, continuing attacks on Hezbollah in Lebanon and expanding Israeli control in Gaza from 60% to 70% in defiance of the ceasefire imposed by Trump in October 2025. But he has run out of options in Iran, largely because his main ally, US President Donald Trump, has also run out of options and regional support.
The Gulf Turns Against War
Not a single country in the Gulf—Saudi Arabia, the UAE, Qatar, Kuwait, Bahrain, or Oman—wants the war to resume. All want to export oil, rebuild facilities damaged by Iranian attacks, and persuade tourists and wealthy foreign residents to return. The military options presented to Trump—resuming bombing, seizing Iranian islands, or attempting to seize enriched uranium—were all deemed too risky or costly.
Trump's final hope is to extract something from the peace agreement that he can claim as a victory. That claim will be empty. The oil markets expect an agreement to reopen the Strait of Hormuz with no tolls and a 60-day ceasefire extension. Beyond that, the war's legacy is a region exhausted and a joke finally realized.
For Asia, the conflict's end has implications beyond oil prices. Japan's central bank, already caught between domestic politics and inflation, now faces a new normal. The Bank of Japan must navigate the aftermath of the war's inflationary spike. Meanwhile, the Shangri-La Dialogue 2026 highlighted how the war reshaped security calculations across the Indo-Pacific, with nations reassessing their reliance on US protection.
