Is The US-Iran Ceasefire "Over," And What Comes Next?

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Is The US-Iran Ceasefire "Over," And What Comes Next?

U.S. Policy and Politics

Is The US-Iran Ceasefire "Over," And What Comes Next? July 8, 2026

It'll Take a More Severe Escalation To Make Markets Really Care

We hope you had a restful 4th of July, because we're back to US-Iran headlines! The US and Iran exchanged a

fresh round of strikes overnight, the US revoked Iran's license to sell oil unencumbered by sanctions, and Trump

declared that "as far as I'm concerned, [the ceasefire] is over." We lay out our initial thinking on these developments

below. We'll be hosting an ad hoc edition of our Iran webcast tomorrow, July 9, at 3pm ET—register here.

1. The ambiguous MOU sowed the seeds of its own destabilization, although we had hoped for a longer period

of relative calm. In our note on the MOU text, we highlighted that ambiguity about the agreement and alleged "back-

channel commitments" were "a potential source of misunderstandings and instability in the deal down the road," but

we got to the end of that particular road sooner than we expected. The breakdown came around Iran's insistence on

exerting some level of control over the Strait, amid MOU language that ambiguously called for some level of continued

Iranian role in managing traffic through the Strait. This led to Iranian strikes on vessels that weren't coordinating with

them, which led to the ongoing US retaliation. These ambiguities were intended to paper over the unresolved differences

between the two sides, so it's not exactly shocking to see it fall apart, despite our optimism last month.

2. These developments are clearly concerning, but we have a long way to go back up the escalation ladder. The US

conducted a larger round of strikes overnight, but continued to confine strikes to military targets.