Summary

Six months into the Iran war: Markets become accustomed to stalemate with no end in sight - Six months after the U.S. and Israel launched major combat operations in Iran, the conflict has settled into a prolonged standoff with no clear end in sight. - The Trump administration has shifted toward economic pressure, including planned secondary sanctions, as it pulls back from further major military escalation. - Experts told CNBC the strategy is unlikely to force Iran to capitulate quickly, while continued attacks around the Strait of Hormuz keep escalation risks high. Friday marks six months since the U.S. and Israel launched "major combat operations" in Iran, prompting retaliatory strikes on targets across the Gulf and sparking a new war in the Middle East. What was initially expected to be a weeks-long conflict has evolved into a standoff that geopolitical analysts say has no end in sight. But the nature of the war has also shifted, with the White House turning its focus to ramping up financial pressure on Iran and its trading partners, a strategy President Donald Trump labeled "economic D-Day." But the conflict's trajectory remains deeply uncertain. Ships attempting to transit the Strait of Hormuz continue to come under attack, peace talks have seemingly collapsed, and questions hang over whether the Trump administration is willing to extend its planned secondary sanctions to China — one of Iran's biggest trading partners. A White House official told CNBC that the U.S. is now "entering the endgame" of its war. The Iranian government has also been approached for comment. Markets grow accustomed to war Oil prices remain volatile amid the ongoing uncertainty. Front-month Brent crude oil futures have gained almost 20% since the war began — but the contracts are now trading around a third lower than their April peak of $126.41 a barrel. The oil market remains in backwardation, a phenomenon that occurs where futures contracts with immediate or near-term deliveries sell at a premium over later deliveries, suggesting an expectation that prices will fall over time. Equity markets have also largely shrugged off the potential ramifications of the conflict, with global stocks seeing a broad rally this year as corporate earnings optimism outweighed concerns about the war's implications for the world economy. No breakthrough in sight As the war neared the six-month milestone, Middle East experts told CNBC that while the nature of the conflict appeared to have shifted, a near-term breakthrough to bring the war to an end is unlikely. "The conflict has lapsed into a standoff, with neither side apparently ready to escalate or make concessions," said Gregory Brew, a senior analyst specializing in Iran and energy at Eurasia Group. Brew said the U.S. had backed away from escalating strikes on Iran, seemingly deterred by the risk of significant Iranian retaliation and concerns that another round of heavy fighting would further deplete munitions stockpiles. "Instead, Trump has opted for a pressure campaign, a 'wait and see' approach, hoping that economic pressure compels the Iranians to capitulate," he told CNBC in an email — but he noted that a breakthrough "doesn't look imminent." "It's unlikely to work," he said of Trump's so-called "Economic D-Day." "Iran has been very resilient in the face of U.S. economic pressure, and while it faces the worst economic crisis since the 1980s," Brew added. "Its leadership is more likely to resist and escalate than to give in to U.S. demands." Will Todman, a senior fellow with the CSIS Middle East Program, agreed that it appeared the U.S. had pivoted to a new strategy. "The 'D-Day' announcement of secondary sanctions on Iran was the clearest sign that economic warfare is now the Trump administration's preferred strategy," he said. "However, there is little evidence to suggest that an economic-centric strategy will force the Iranians to capitulate or make more substantial concessions in talks." Iran's economy squeezed Steven A. Cook, Senior Fellow for Middle East and Africa Studies, Council on Foreign Relations, said the U.S. would likely respond militarily if any American ships or personnel are attacked, but added that the Iranian leadership is prepared to endure a lot of hardship and inflict a lot of pain on its own population. "That suggests they will not give up or compromise so quickly," he said. "There is no telling how long this will go on. The president thought the war would last four to six weeks. He never expected them to resist effectively. The Iranians have now discovered the power of their geography and seem unwilling to give up on controlling/administering the Strait of Hormuz." Dennis Ross, a former U.S. diplomat who served as the special Middle East coordinator under President Bill Clinton, told CNBC it seems clear for now that Trump does not want to resume all-out military operations. "His new approach is to tighten the economic noose around the Iranians," he said. However, Ross noted that over the years, the Iranian regime has "become good at workarounds and evasion of sanctions." "But the combination of the blockade and what may be tighter enforcement of sanctions will put more pressure on an Iranian economy already in free fall," he said in an email. "That said, this Iranian leadership does not mind imposing hardship on its public and thinks it can outlast the president." If the new approach is successful in squeezing the Iranian economy significantly more, he added, there was a good chance Tehran would escalate militarily or target its neighbors' ability to export. Trump told Al Jazeera on Wednesday that he was prepared to continue the Iran war for as long as necessary. But experts said a lack of clarity on Washington's objectives made it difficult to quantify what would actually constitute mission accomplished for the White House. Measuring success in the Iran war "The Trump administration has still not defined what victory for the United States would look like, although it has articulated wide-reaching goals," CSIS's Todman said. "These range from ending Iran's nuclear program to opening the Strait of Hormuz to regime change. It is therefore impossible to determine if the U.S. can win or not." He added that it was very unlikely Iran would make the concessions the president wants to see. "They feel emboldened by their ability to withstand six months of war with the United States and Israel, despite having far inferior military capabilities." Michael O'Hanlon, director of research in the Brookings Institution's Foreign Policy program, said Trump had "blundered in getting into a war with unrealistic expectations of what it would entail or how long it would last," and had settled on "the least bad option." "Whether we win or lose in a zero-sum sense against Iran, we should worry about three central things and keep our eye on the ball: reducing, limiting [or] ending the violence, reopening Hormuz, and putting a long-term lid on Iran's nuclear program," O'Hanlon, who specializes in U.S. defense strategy, the use of military force, and American national security policy, added. "If that happens, our core strategic objectives will be realized — whether we have bragging rights to have 'won' the war or not."