by Col (Dr) P K Vasudeva
If the reported 60-day U.S.–Iran memorandum has effectively broken down, it certainly reduces the chances of a quick settlement. However, it does not mean that peace is impossible. History shows that U.S.–Iran relations have gone through repeated cycles of confrontation followed by renewed negotiations.
Once a ceasefire or memorandum collapses, both sides often focus on military and political leverage before returning to diplomacy. Current reporting indicates renewed military activity and growing regional tensions.
Even after failed talks, both governments have incentives to avoid an open-ended conflict because of military costs, economic disruption, and pressure from allies and trading partners. A lasting peace remains possible, but it would likely require agreements on several difficult issues rather than just a temporary ceasefire. Those include Iran's nuclear programme, sanctions, regional proxy groups, maritime security, and mechanisms to verify compliance.
There are several factors that could improve the prospects for peace:
• Effective mediation by third countries
• Rising economic costs that make continued conflict less attractive
• Domestic political incentives in both countries to reduce tensions
• A limited ceasefire that gradually expands into broader negotiations.
However, there are factors that could make peace harder. These include:
• Deep mutual mistrust built over decades
• Disagreements over nuclear activities and sanctions
• Actions by regional allies or proxy groups that can derail negotiations
• Domestic political pressures that discourage compromise.
It is presumed that the outlook is cautiously pessimistic in the near future, but not hopeless over the longer term. Diplomatic efforts often resume after periods of escalation, even when previous agreements have failed. The biggest challenge is that any future agreement would need stronger enforcement and clearer commitments than a short-term memorandum. The outlook appears pessimistic because the obstacles are structural rather than simply the result of one failed agreement. The "pessimistic" here refers mainly to the near term. Over longer periods, international disputes sometimes do improve after extended negotiations.
Deep mutual distrust is the main reason for the failure of MOU. The U.S. and Iran have had decades of strained relations. Each side has repeatedly accused the other of violating past commitments, making new agreements harder to negotiate and sustain.
There are a large number of interconnected disputed issues. These involves Iran's nuclear activities, sanctions, regional security, military deployments, and relationships with armed groups in the Middle East. Progress on one issue can be undermined by disagreements on another. Leaders in both countries face internal political pressures. Even if negotiators reach an agreement, it may face criticism or opposition at home, making implementation more difficult. Other countries and non-state actors have important interests in the region. Escalation involving any of them can complicate or delay diplomacy between the U.S. and Iran.
Trust takes lot of time to rebuild. After a ceasefire or memorandum breaks down, both sides often become more cautious. Future negotiations usually require stronger verification, monitoring, and confidence-building measures before either side is willing to make significant concessions. At the same time, there are reasons not to assume conflict will continue indefinitely:
• Neither side necessarily benefits from a prolonged, costly conflict.
• Regional and global powers often have strong incentives to encourage de-escalation.
• Diplomatic channels can reopen even after periods of intense confrontation.
• History includes examples where negotiations resumed after serious setbacks.
So the assessment is not that peace is unlikely forever. Rather, it is that a rapid, comprehensive settlement is less likely immediately after a breakdown, while the chances of renewed diplomacy over the next year or two remain meaningful if both sides conclude that the costs of continued confrontation outweigh the benefits.
There are several reasons analysts often expect diplomacy to re-emerge even after a breakdown:
• Conflicts are expensive. Sustained military operations, economic disruption, and regional instability create incentives for governments to look for off-ramps.
• Back-channel communication often continues. Even when public talks stop, governments sometimes keep indirect contacts through intermediaries.
• International pressure. Other countries frequently encourage renewed negotiations to reduce the risk of a wider regional conflict.
The U.S. and Iran have alternated between confrontation and negotiation before. Periods of heightened tension have sometimes been followed by talks. However, "meaningful" does not mean "likely to produce a lasting peace." It could simply mean:
• limited ceasefires,
• prisoner exchanges,
• agreements to avoid military escalation, or talks on specific issues rather than a comprehensive settlement.
So the distinction is between diplomacy resuming and the underlying relationship being fundamentally transformed. The former is often easier to achieve than the latter. That is a plausible concern, but the scale of the impact depends on how the conflict evolves. If fighting between the U.S., Iran, Israel, or their allies were to continue or widen:
The global economy could face higher energy prices, disrupted shipping (especially if routes like the Strait of Hormuz were affected), increased inflation, and greater financial market volatility. The severity would depend on how long disruptions lasted and whether major oil exports or shipping lanes were significantly affected.
Israel could face substantial costs, including damage from missile or drone attacks, disruptions to tourism and investment, pressure on public finances, and broader security challenges. The extent would depend on the intensity and duration of the conflict. However, there are also reasons why many governments work to prevent prolonged escalation. A wider regional war would likely impose significant costs on many countries, not just those directly involved. Major powers and regional actors often have incentives to push for de-escalation because of the economic and security risks.
Financial markets and energy supplies have shown resilience in past crises, although some conflicts have caused temporary spikes in prices and uncertainty. So it is reasonable to say that a prolonged, expanding conflict would increase risks for both the world economy and Israel, but it is not certain that those worst-case outcomes will occur. Much depends on whether the conflict remains geographically limited or broadens to involve additional countries or sustained disruptions to trade and energy infrastructure.
If the war like situation and retaliation continues, it would likely have significant consequences for global energy markets and the broader economy. Recent reporting indicates that the conflict has expanded, with U.S. strikes reportedly targeting Iranian infrastructure and Iran responding with attacks on U.S.-linked military facilities and infrastructure in the Gulf region. There have also been repeated warnings that there is no immediate breakthrough toward a ceasefire.
Some of the likely effects are:
• Markets become concerned whenever fighting threatens the Strait of Hormuz, through which roughly one-fifth of the world's oil supply passes. Even without a full closure, increased risk to shipping can push oil prices higher. Recent reports note Brent crude has already risen as the conflict intensified.
• Higher fuel prices worldwide: More expensive crude typically translates into higher prices for petrol, diesel, aviation fuel, and shipping.
• Inflationary pressure: Higher energy and transport costs can increase the prices of food, manufactured goods, and other essentials.
• Supply chain disruptions: Damage to ports, bridges, railways, and energy infrastructure can slow trade and industrial production in the region.
Economic impact on Gulf countries: Missile and drone attacks on military bases or nearby infrastructure in Bahrain, Kuwait, Qatar, and Oman could disrupt business activity and investor confidence if they continue.
Financial market volatility: Investors often move toward perceived safe-haven assets such as gold and government bonds during periods of geopolitical uncertainty.
The duration of these effects depends on whether:
• the conflict remains geographically limited,
• attacks begin to significantly disrupt oil exports through the Strait of Hormuz, or diplomatic efforts succeed in securing a ceasefire or reducing hostilities.
A prolonged conflict would generally pose a much greater risk to global growth and inflation than a short-lived escalation. Recent statements from both sides suggest tensions remain high, while regional governments and international actors continue to call for de-escalation.
US President Trump does not believe China or Russia are participating in the ongoing Iran conflict, but warned that if they get involved it would be very bad for them. As a matter of fact both the countries are supporting Iran by providing arms, ammunition, missiles, drones, radars and so on.
If China and Russia were to provide substantial military assistance to Iran during an active conflict with the United States, the implications for the U.S. would depend on the nature and scale of that support. It's also important to distinguish between confirmed facts and allegations. While there have been reports and intelligence assessments suggesting Chinese and Russian entities have provided Iran with various forms of support, the full extent of any current military assistance is publicly disputed. President Trump has stated that he believes neither country is directly participating, even while warning of consequences if they do.
If support from China and Russia became significant, the United States could face several challenges:
Higher military costs: The U.S. could need to deploy additional air, naval, missile-defence, and intelligence assets to the Middle East, increasing operational costs.
Longer conflict: Better-equipped Iranian forces could prolong hostilities, requiring sustained U.S. military involvement.
Greater risk to U.S. forces: More advanced drones, missiles, radar, electronic warfare systems, or intelligence support could make U.S. bases, ships, and aircraft more vulnerable.
Economic pressure: A prolonged conflict that disrupts oil exports or shipping in the Gulf could raise global oil prices, increasing inflation and fuel costs in the U.S. and elsewhere.
Strategic competition: The U.S. would need to divide military attention and resources among multiple regions, including Europe and the Indo-Pacific, while managing the Middle East.
Expanded sanctions and diplomacy: Washington would likely respond with additional sanctions on companies or individuals accused of supplying Iran and increase diplomatic pressure on Beijing and Moscow. Reports indicate the U.S. has already sanctioned some Chinese entities over alleged support to Iran's procurement networks.
At the same time, China and Russia would also face significant risks if they became more directly involved:
• Increased U.S. and allied sanctions.
• Potential disruption of trade and financial ties with Western economies.
• Damage to diplomatic relations.
• A higher risk of military incidents, even if neither side sought a direct war.
For these reasons, many analysts assess that both Beijing and Moscow have incentives to avoid overt military intervention while still seeking to protect their strategic interests in the region. Public reporting has generally described their approach as one of limited or indirect support combined with diplomatic engagement, rather than direct participation in combat.
Conclusively, the greatest implication for the United States would likely be a more prolonged, expensive, and strategically complex conflict, rather than an immediate direct war with China or Russia. Whether the situation escalates to that level depends on political decisions by all parties, not only on military capabilities.
The writer is a defence analyst and commentator. He is former Professor ‘International Trade’
