The United States and Iran are preparing for talks this weekend in Pakistan following a costly conflict that has disrupted global energy markets, strained the NATO alliance, and triggered inflation that threatens Republican control of Congress ahead of November's midterm elections. Oil prices have surged from roughly $70 per barrel before the war in late February to more than $119 at times, with Brent crude rising 0.7% to $96.58 Friday. Gas prices at the pump have jumped to about $4.15 a gallon, up from just under $3 before the conflict began.
The war's economic fallout has directly undermined President Donald Trump's campaign promises to curb inflation and trigger a jobs boom. U.S. consumer prices rose 3.3% in March from a year earlier, up from 2.4% in February and the biggest yearly increase since May 2024. Higher gas costs can reduce Americans' ability to spend on other goods and services, slow the economy and worsen unemployment, stretching the budgets of lower- and middle-income households as stock markets reel and the labor market weakens.
Incomplete War Aims
Israeli Prime Minister Benjamin Netanyahu would get an "incomplete" if graded for the war. Netanyahu set ambitious goals at the outset of the fighting on Feb. 28, saying he wanted to remove the threats posed by Iran's missile and nuclear programs and its support for hostile proxy groups. He also vowed to create the conditions for a popular uprising against the Iranian government. None of those goals were fully achieved. In a televised address after the ceasefire, Netanyahu acknowledged "we still have goals to complete," but said there had been "immense achievements." He said, "Iran is weaker than ever, and Israel is stronger than ever. This is the bottom line of this campaign."
Israelis overwhelmingly supported the war against Iran, especially in the early days, but later grew tired as nonstop air-raid sirens disrupted daily life and sent people scrambling into bomb shelters around the clock. Netanyahu is hoping the U.S. will shore up battlefield gains into a permanent agreement that guards Israel's interests, and he must also ensure his relationship with Trump remains strong after an inconclusive war that was deeply unpopular in the U.S. Otherwise, Netanyahu could struggle for his job when his war-weary nation heads to the polls.
Iran's Strategic Position
Iran was battered by nationwide protests in January and heavy airstrikes in the war, but suddenly found itself in a position of power. The threat of sea mines and possible attacks from Iran's paramilitary Revolutionary Guard has ships staying away from the Strait of Hormuz, effectively keeping the waterway crucial for international energy shipments closed. The conflict has largely shut down the flow of ships through the Strait of Hormuz, through which about one-fifth of the world's oil travels, and has damaged oil and gas production facilities across the Middle East.
Even hard-liners have spun the killing of 86-year-old Supreme Leader Ayatollah Ali Khamenei into the idea of replacing him with a younger, more hard-line version of himself in his son, Mojtaba. The government has put forward its own maximalist demands ahead of the Islamabad talks, including continuing to enrich uranium in its nuclear program, one of the chief reasons Trump gave for going to war. Yet Iran's military sites now sit in ruins, its missile arsenal broadly depleted, and the threat of more protests by its people still looms. Unrest could be spurred by the destruction in Iran's oil and gas industry, as well as attacks targeting steel mills and other economic sites.
Regional Instability
After insisting and pleading with Iran to leave them out of the conflict, Gulf Arab states still found themselves targeted by Iran, which rained down drone and missile fire on airports, energy sites, military bases and civilian targets across the region. Many had to close refineries or say they were unable to meet promised oil output because of the war. Even with a ceasefire in place, Iran's new control of the Strait of Hormuz through threats alone means Gulf states still are not able to get their energy shipments to market. The Gulf states are not a monolith, with opinions ranging from Oman's efforts at diplomacy to the United Arab Emirates denouncing Iranian aggression and insisting the status quo cannot stand.
The regional war has taken a devastating toll on Lebanon, and the prospect of a ceasefire leaves more questions than answers. The U.S. and Israel are at odds with Iran over whether their ceasefire extends to the war between Israel and Hezbollah in Lebanon. Iran says it does; the U.S. and Israel say it does not. Lebanese and Israeli officials have agreed to enter direct negotiations, which Lebanon hopes will lead to a ceasefire and Israel hopes will lead to disarmament of Hezbollah. Netanyahu said the negotiations would also include talks about a potential peace agreement between the two countries, which do not have diplomatic relations. Lebanon wants a halt to Israeli strikes before the talks start, a condition Israel is unlikely to agree to. Most analysts believe Lebanon does not have the capacity to disarm Hezbollah by force or enforce any ceasefire agreement that Hezbollah does not agree to. For now, the Israel-Hezbollah war that has displaced more than a million people and killed nearly 1,900 continues.
NATO Under Pressure
Trump has repeatedly tested the 32-member NATO alliance. He cut off direct U.S. military assistance to Ukraine, threatened to take the Arctic territory of Greenland from NATO ally Denmark, and cajoled members to spend more on defense. His differences with NATO allies over Iran are raising new questions about whether the alliance, created as a curative to post-World War II instability, can survive. Since launching the war, Trump has derided allies as "cowards," slammed NATO as "a paper tiger" and compared U.K. Prime Minister Keir Starmer to Neville Chamberlain, the former premier known for a policy of appeasement toward Nazi Germany.
Trump is angry at member countries ignoring his call to help as Iran effectively shut the Strait of Hormuz, and at alliance members Spain and France restricting the use of their airspace or joint military facilities by U.S. forces supporting operations in Iran. Trump said the moment is "a mark on NATO that will never disappear."
Political and Economic Fallout
Trump won back the White House promising to curb inflation, bring down prices and trigger a jobs boom, but the war has done the opposite, raising gas prices, leaving stock markets reeling and sending shockwaves through the economy as the labor market weakens and inflation begins rising anew. With November's midterms looming, none of that is good for Republicans trying to keep control of Congress. Trump initially tried to calm economic fears by visiting swing states, but he first scoffed at affordability worries as a hoax and then stopped those trips altogether as the war consumed his administration.
Making a ceasefire stick might eventually stabilize oil prices and financial markets, but reversing economic pain around the globe may take far longer, potentially affecting voters closer to Election Day. Polling also shows that most Americans believe U.S. military action in Iran went too far, and the war has caused a rift within Trump's once seemingly unflappable MAGA base.
Why This Matters:
The weekend talks in Pakistan occur against a backdrop of significant economic and strategic costs that will shape American politics and global markets for months. With gas prices up more than a dollar per gallon and inflation accelerating to 3.3% annually, household budgets face immediate pressure that could determine control of Congress in November. Iran's effective closure of the Strait of Hormuz through threats alone demonstrates how military action failed to achieve stated objectives while empowering adversaries with leverage over global energy supplies. The unresolved status of Lebanon and Hezbollah, combined with Iran's continued uranium enrichment demands, suggests the talks face substantial obstacles. Meanwhile, the fraying NATO alliance and Gulf states' inability to ship energy products reveal how the conflict has weakened rather than strengthened American strategic position in the Middle East, with fiscal and security consequences that extend well beyond the immediate ceasefire.