As we predicted in our previous column, the war in Iran is about to re-start, on the premise of the mis-understanding between the two parties. Article 5 of the Islamabad Agreement states that “Upon the signing of this MoU, the Islamic Republic of Iran will make arrangements using its best efforts for the safe passage of commercial vessels with no charge for 60 days only from the Persian Gulf to the Sea of Oman and vice versa. […] The Islamic Republic of Iran will conduct dialogue with the Sultanate of Oman to define the future administration and maritime services in the Strait of Hormuz in discussion with other Persian Gulf littoral states in line with the applicable international law and the sovereign rights of coastal states of the Strait of Hormuz.”

So, as we discussed last week, the attacks by Iran on commercial vessels following routes not agreed upon with the Islamic Republic were considered in Tehran to be an “implementation” of Article 5. Conversely, the US considers them to be a violation of the Islamabad Agreement. As a result, the US has re-started its campaign of raids against Iranian military facilities, when the funeral of the former Supreme Leader was still occurring; and Trump said that the “ceasefire is over”, as the Iranians leaders are “scum” and “sick.”

It’s possible that Trump finally realised how bad the Agreement was. All independent commentators found that the concessions made to Iran were vastly superior to those made by the Islamic Republic to the US. Even MAGA supporters like Oren Cass realised that “the war was lost”, both militarily and diplomatically; he suggested the US admit defeat, cut its losses and go home. It is also possible that Trump never intended to respect the deal, as he generally does not keep his word in such matters. Even during his activity as a construction mogul, there are countless examples of how he tore apart contracts that had just been signed, refusing to pay his suppliers, or deliver what promised to his clients. So, nothing new from this side.

From the side of Iran, it is obvious that they have an additional reason not to trust anything that Trump says, promises or signs. The US has repeatedly bombed the Iranians while engaging in negotiations. It did so on 28 February 2026 (when the war formally began), then again several times before the ceasefire was agreed to, and now during the ceasefire. Thus, while negotiations formally continue, with a new round set to start in coming days, it is obvious that the level of distrust between the two sides is at its highest level, and whatever may be agreed upon may not withstand the test of time.

Additionally, the Iranians – during the funeral of Ali Khamenei, killed by the airstrikes of 28 February 2026 – have promised to vindicate the killing of the former Supreme Leader. Trump said that he left orders on what to do if he gets killed: namely, carry out devastating bombing campaign. Of course, it’s unclear if JD Vance would decide to follow through with that order.

The question is: what is going to happen now? We believe that the two “corner solutions” of this “repeated game” – i.e. the use of a nuclear weapon by the US to destroy what’s left of the Iranian resistance, or the grand invasion by the US troops remain unlikely occurrences. Also the idea that the US can leave without having reopened the Strait of Hormuz is now far-fetched, so the plan to “cut the losses and go home” cannot be credibly implemented.

What seems more likely is a prolonged war of attrition between the two sides, with occasional flare-ups between intervals of relative calm, with the Strait being intermittently opened and closed. This condition may last for years, until some new fact emerges, such as the election of a different leadership on either side, economic collapses, unsustainably high inflation, etc. This is a far worse outcome for business confidence, and therefore for equity valuations, than a decisive end to the conflict would be. Ironically, Trump may have entered one of the “forever wars” of the Bush era, which he solemnly declared to want to bring an end to during his campaign trails.”