Trump's Iran Deal Rhetoric Masks Slow Progress on Nuclear Talks

Donald Trump announced on Thursday evening that the United States and Iran were on the verge of a peace agreement. Oil prices fell. Stock markets rose. Hours earlier, he had threatened Iran with strikes described as "VERY HARD," a warning that had sent oil prices climbing and equities tumbling. This is the rhythm that has defined the past months of negotiations: announcement, threat, reversal, announcement again. The markets respond each time like trained animals. Traders make money. The people of the Middle East live in a state of perpetual whiplash between fear and hope.

This is the 39th time—or possibly higher, depending on how you count—that Trump has declared US-Iranian talks to be on the brink of resolution. On five of those occasions, the promise of peace came immediately after threats of mass destruction, including strikes on civilian infrastructure that would constitute war crimes if carried out. On Thursday night itself, as Trump menaced Iran with devastating strikes, he also pledged that the United States would seize total control of the country's oil and gas markets and capture the island of Kharg, a critical hub of Iran's hydrocarbon industry. This threat came while the two sides were already engaged in tit-for-tat bombing. A critical reservoir and water tanks in Iran's drought-stricken south had been badly damaged—intentional destruction of civilian water infrastructure would be a war crime.

By Thursday afternoon, the prospect of imminent devastation had evaporated. Trump announced on his Truth Social platform that he had cancelled the scheduled strikes. By Friday, the White House briefed reporters that a text existed which both sides could accept, and that a signing ceremony might occur within days. Iran's foreign ministry was more cautious, saying the proposed agreement was still being studied by the country's decision-making bodies. The oil price nonetheless fell below $90 a barrel.

A BBC investigation found that multimillion-dollar trades have been executed in global markets just before Trump makes major announcements, particularly in oil futures. Yet after so many false alarms and hoaxes, why do traders still react? One explanation is that individual traders, while not themselves foolish, suspect their competitors might be, so they move quickly to stay ahead. Another, offered by economist Justin Wolfers, is the "known liar problem"—markets know Trump is unreliable and heavily discount what he says, but the economic stakes of war or peace in the Gulf are so enormous that even a discounted reaction still moves prices significantly.

Beneath the noise, actual negotiations are happening. A ceasefire has mostly held since April. The two sides are working toward a limited memorandum of understanding that would defer nuclear negotiations and focus instead on reopening the Strait of Hormuz, a vital global trade route. But real gaps remain. Iran, lacking confidence that Trump would honor any agreement, wants $24 billion paid upfront from an estimated $100 billion in frozen assets around the world in exchange for lifting its blockade. The United States wants rewards to follow tangible progress. The administration faces a political problem: Trump and other Republicans have spent years attacking Barack Obama for unfreezing Iranian assets as part of the 2015 nuclear deal, which successfully constrained Iran's nuclear program until Trump withdrew from it in 2018. A workaround being discussed involves a line of credit from a Gulf state bank, using Iran's frozen assets as collateral—a solution that will satisfy those who wish to be satisfied.

The second major sticking point is nuclear detail. The United States wants concrete parameters: a 15-year moratorium on uranium enrichment and arrangements for disposing of Iran's highly enriched uranium stockpile. Iran, in recent briefings to diplomats and experts, has barely mentioned these issues and is pressing for only vague nuclear references in the memorandum, leaving specifics for later negotiations in Geneva. Trump may have offered a way forward by insisting the deal will ensure "Iran will never have a nuclear weapon"—language Tehran might accept. Iran's supreme leader, Ali Khamenei, was killed by an Israeli bomb on February 28, at the start of the US-Israeli war on Iran. Any Iranian pledge now would be secular and contingent on the agreement being upheld.

A compromise memorandum appeared close in late May, but Trump derailed it by suddenly demanding that regional guarantors of the agreement normalize relations with Israel as a gesture of gratitude for the suspension of hostilities. The suggestion was met with stunned silence across the Middle East. Throwing last-minute surprises into negotiations has long been Trump's tactic, but it has not worked here. Instead, he has wavered between all-out war and messy compromise, hoping to be presented with a third option that never materializes. Vali Nasr, a former State Department adviser now at Johns Hopkins, said: "You have an impasse. Trump doesn't have any good options. He's come close to accepting an MoU, but then he's backed away because it's difficult for him to politically sell it at home and claim victory."

Some observers believe Trump could accept an MoU and claim victory before the World Cup, leaving the larger nuclear questions for later talks. The administration blames delays on divisions within Tehran, where Foreign Minister Abbas Araghchi is constantly second-guessed by Revolutionary Guards generals. The internal dynamics of the Iranian regime are now opaque. What is clear is that the Islamic Revolutionary Guard Corps, the principal target of US-Israeli bombing, has emerged stronger relative to other power centers. Khamenei's successor, his badly injured son Mojtaba Khamenei, may be little more than a figurehead. Yet the regime has proven remarkably resilient. Dead leaders have been replaced. Domestic unrest has been suppressed. The war has made that suppression easier. The economic war being waged by the United States is borne primarily by ordinary Iranians—runaway inflation, high unemployment—but it has not yet forced the leadership to capitulate. Peace may actually be more dangerous to the regime than war, because there will no longer be an external enemy to blame for economic failure. This is partly why Tehran insists on getting funds upfront.

Despite Iran's survival in the face of a US-Israeli assault in which the US alone claims to have bombed 13,000 targets, Israeli leaders and Washington hawks continue to push Trump toward one more major military push. Even if an MoU is agreed, they are confident the nuclear talks will collapse over Iran's insistence on its right to enrich uranium. A former Pentagon deputy chief of staff told BBC Radio 4 that Trump would eventually order a much larger strike, targeting oil facilities and military leadership, and could forcibly reopen the strait himself. For all his past threats of civilizational erasure, Trump has so far shown reluctance to double down on a military bet that has already failed. Ali Vaez, Iran project director at the International Crisis Group, argued that Trump's latest threat of devastating strikes was performative—either to force last-minute Iranian concessions or to justify a deal he knows the hawks will criticize. Richard Nephew, a former Iran affairs director at the National Security Council, said Trump is probably poised to cut some sort of deal and will want to describe any Iranian concession as the result of his aggressive posturing. The question now is whether he will actually take it.