President Trump's recent promise to Israel has fundamentally reshaped the high-stakes negotiations with Iran.
For months, the world has been grappling with a severe energy shock. This began when conflict led to the closure of the Strait of Hormuz, a critical chokepoint for global oil supplies. Since the closure in late February, oil prices have surged over 40%, creating immense economic pressure on nations worldwide. The immediate prize everyone is eyeing is simple: reopen the strait and get the oil flowing again.
To achieve this, the U.S. and Iran have been discussing a memorandum of understanding (MoU). The idea was to implement a temporary 60-day ceasefire, during which the strait would reopen and talks on Iran's nuclear program would begin. News of these potential talks recently caused oil prices to dip slightly, showing just how sensitive the market is to any sign of de-escalation.
However, Trump's new pledge to Israel changes the game entirely. He has assured Prime Minister Netanyahu that he will not sign a 'final' deal unless Iran agrees to two maximalist conditions. First, Iran must completely dismantle its entire nuclear program. Second, it must remove all of its highly enriched uranium (HEU) from its territory. This hardline stance is supported by long-standing U.S. policy goals and UN 'snapback' sanctions that were reimposed in 2025.
This effectively splits the negotiations into two distinct phases. Reopening the Strait of Hormuz is now just 'Phase 1'—a short-term logistical fix to ease the oil crisis. The much more difficult 'Phase 2' is the permanent nuclear settlement. So, while we may see a temporary deal that brings some relief to oil prices, the path to a lasting peace has become much steeper. The significant 'war risk premium' embedded in oil prices is unlikely to disappear until the complex and challenging nuclear issue is fully resolved.
- Strait of Hormuz: A narrow waterway between the Persian Gulf and the open ocean. It is one of the world's most important strategic chokepoints, with a large portion of global oil supplies passing through it.
- Highly Enriched Uranium (HEU): Uranium that has been processed to increase the concentration of the U-235 isotope, which can be used to produce nuclear weapons.
- War Risk Premium: An additional amount added to the price of a commodity, like oil, to account for the risk of supply disruptions due to geopolitical conflict or war.