The Bottom Line:
Capstone believes the June 17th Memorandum of Understanding (MOU) to end the US-Iran war included fundamental misunderstandings. The Strait of Hormuz will remain a contested waterway under de facto Iranian control, with Tehran retaining leverage over global energy flows. Investors and corporates with exposure to global oil supply, Gulf infrastructure, or maritime logistics should not interpret recent market calm as a reliable signal. Last week’s turbulence is the new normal.
- Iran’s attack on a Singapore-flagged cargo ship in the Strait of Hormuz on June 25th followed by an exchange of fire by the US and Iran over the weekend and subsequent ceasefire announcement, is part of a cycle that directly challenges the premise underlying the MOU and exposes a core disconnect that has defined this negotiation from the outset.
- Trump treated the MOU as a security arrangement requiring Iranian strategic commitments, while Tehran treated it as a sanctions relief vehicle with no corresponding obligations on nuclear inspections or Strait of Hormuz shipping access. The events of the last week make both of those gaps impossible to ignore, yet oil markets do not reflect the instability and volatility of the situation in the strait.
- The MOU will continue to falter as conflict becomes the new status quo. Oil markets are underpricing the likelihood of continued disruption to strait transit. Markets priced-in diplomatic progress when the MOU was announced; the underlying military reality did not change, and recent events confirm it.
- The 60-day MOU negotiating clock is largely a distraction. Nuclear discussions of this complexity take months, and the parties will extend the timeline repeatedly. The operative dynamic in the interim is a cycle of limited strikes, pauses, and resumed diplomacy, not a clear resolution that the markets are expecting.
The Strait Will Remain Contested
US action must be understood through the lens of President Donald Trump’s desire to reclaim the narrative and cement his legacy. He cannot afford to appear weak. The administration has sought to reestablish credibility through military strikes, and on Monday morning, June 29th, President Trump announced that negotiations to end the war would resume in Qatar this week, a pattern of violence and negotiation that will likely repeat. Iran faces its own domestic political constraints and will not yield. This back-and-forth is the new normal, not a temporary disruption.
Control of the Strait of Hormuz is the most powerful card that Iran currently holds, more consequential to global energy markets than its proxy network or missile inventory. Before the war, the strategic waterway was an internationally recognized, open shipping route, governed by international maritime law. Ships were not required to obtain permission to transit the strait from either Iran or Oman.
But now Iran has asserted its control over the strait and has numerous tools to exercise its leverage over the waterway and thus energy markets. Tehran justified the June 25th attack on the Singapore-flagged cargo ship traveling the southern route, along the Omani coast, by saying the ship violated its policy that requires vessels to coordinate directly with Iranian authorities to sail through the strait, and that they may only transit the northern shipping route, closer to Iranian shores than to Oman. The June 25th drone attack on the cargo ship highlights that Iran seeks to establish a precedent that strait access is a negotiable, revocable privilege rather than an established navigational right.
On Sunday, June 28th Iran’s foreign minister emphasized this point when he said that “any attempt to adopt new or separate arrangements from those currently being pursued by the Islamic Republic will only lead to further complications, delays in reopening the Strait of Hormuz, and an increase in tensions.”
As a result of the resumption of hostilities, ship traffic through the strait dropped again after briefly reaching its highest levels last week since the war started.
Treasury’s General License Will Empower Iran
On June 22nd, the Treasury Department issued a general license authorizing Iranian oil sales, including exports to the United States. The license covers crude and all derivatives, petrochemicals and petroleum products, with no cap on export volumes. Petrochemicals represent Iran’s second largest economic sector.
Equally significant is the license’s authorization for Iran to conduct oil transactions in US dollars, from which Iran was banned for decades. Restored dollar access combined with uncapped export volumes removes the two principal constraints that have suppressed Iranian petrochemical revenues for a decade, enabling Tehran to rebuild that sector’s export capacity and repatriate earnings in ways that will benefit its economy regardless of how the nuclear talks conclude.
Congress Will Stay on the Sidelines
Vice President JD Vance’s announcement of an Iranian Revolutionary Guard (IRGC)-US Central Command (CENTCOM) coordination cell generated predictable outrage among Republican Iran hawks, who remain privately baffled by the administration’s concessions to Iran but are unwilling to mount a public challenge. Congress retains meaningful tools, most notably the Countering America’s Adversaries Through Sanctions Act (CAATSA), which statutorily mandates sanctions on the IRGC and Iran’s ballistic missile program and cannot be waived by executive action alone. Enforcing those statutory sanctions against a sitting president, however, requires political will the Republican conference has not demonstrated. Members facing retirement or openly opposed to Trump may speak out. No others will defect.
War Powers votes and congressional statements should not be read as precursors to action but rather statements of ire from members critical of Trump who have nothing to lose.
Lebanon Deal a Bright Spot, but Conflict will Persist
Israel and Lebanon’s non-Hezbollah entities reached a meaningful agreement, with Israel clarifying that its objective is disarmament of Hezbollah, not territorial control. Lebanon made parallel commitments, but Hezbollah retains a de facto veto over any arrangement. Its continued arms possession and blocking power within Lebanese political institutions means no Lebanese government commitment is enforceable without Hezbollah’s consent.
Meanwhile, Netanyahu faces elections in October that limit his tolerance for outcomes that can be characterized as weakness on his right flank. Trump’s decision to link Lebanon to the broader Iran negotiations alarmed Israeli leadership. Vance’s critical posture toward Israel reflects a deliberate accommodation of the GOP’s nationalist, non-interventionist wing. Expect continued friction in Lebanon, which will in turn generate pressure on the Iran negotiations at each escalation point.
What’s Next
The MOU will continue to falter as conflict becomes the new status quo. Oil markets are significantly underpricing the likelihood of continued disruption to strait transit. Markets priced-in diplomatic progress when the MOU was announced; the underlying military reality did not change, and last week’s events confirm it.
The 60-day MOU negotiating clock is largely a distraction. Nuclear discussions of this complexity take months, and the parties will extend the timeline repeatedly. The operative dynamic in the interim is a cycle of limited strikes, pauses, and resumed diplomacy, not a clear resolution that the markets are expecting.
Future actions by Iran to exercise de-facto control over the strait could include new regulatory requirements, expanded inspection regimes, or selective harassment of specific flag states or cargo categories.
Read more from Capstone’s National Security and Defense Team:
Navy Investment to Expand the Maritime Industrial Base
Running on Empty: The Prolonged Energy Market Fallout from the Iran War
The Industrial Surge: How Defense Dollars Will Strengthen American Supply Chains
