Rising Tensions Could Push Iran and Trump Toward a New Deal or Conflict

James Durso

James D. Durso is the Managing Director of Corsair LLC, a supply chain consultancy. In 2013 to2015, he was the Chief Executive Officer of AKM…

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By James Durso – Feb 05, 2025, 6:00 PM CST

The economic and geopolitical pressure on Iran is set to increase in 2025, with renewed U.S. sanctions, nuclear tensions, and the risk of conflict with Israel and the U.S.
Despite tensions, Iran and Trump may negotiate a new deal, as both sides have signaled openness to diplomacy.
Hardliners in the U.S. and Israel are pushing for preemptive action against Iran’s nuclear program.

Iran faced many challenges in 2024:

Regional Setbacks: Iran’s influence in the Middle East suffered major blows. Israel attacked its embassy in Damascus, and key allies Hezbollah in Lebanon, Hamas in Gaza, and the Assad regime in Syria faced defeats, weakening Iran’s “Axis of Resistance.” (Hamas, though, has regrouped, taking some of the sting out of that setback.)

Economic Crisis: Iran’s economy continued to deteriorate, with the Iranian rial plunging to its lowest historical value. The economic crisis was exacerbated by renewed U.S. sanctions and continued corruption and mismanagement.

Political Isolation: Diplomatically, Iran faced isolation as Hezbollah agreed to a cease-fire with Israel, mandating the withdrawal of Hezbollah’s troops from southern Lebanon, stripping Iran of a key avenue for military influence.

Leadership Crisis: The sudden death of President Ebrahim Raisi in a helicopter crash created a power vacuum and intensified factional disputes within the regime.

Domestic Unrest: Public dissatisfaction with the government grew due to economic hardship, political repression, and complaints about the cost of foreign proxies. Protests and large-scale demonstrations highlighted the growing disconnect between the state and its citizens.

These challenges collectively placed the Iranian regime in a vulnerable position, with growing internal and external pressures, including one named Donald J. Trump.

In 2025, the pressure on Iran won’t ease.

Economic Struggles: The Iranian economy remains under severe pressure due to ongoing sanctions, corruption, mismanagement, inflation, and currency devaluation. The potential for renewed U.S. sanctions under the Trump administration adds to the economic uncertainty. In December 2024, the U.S. sanctioned Iran’s “shadow fleet” of tanker ships that Washington claims are key to funding Tehran’s nuclear weapons program.

Nargiza Umarova notes that Iran is working with Afghanistan’s Taliban government to develop an overland transport corridor to China, which will increase regional trade, partly addressing its economic woes, and give both sides an interdiction-proof line of communication. Iran is also growing its economic and political opportunities by hosting the longest overland portion of the International North–South Transport Corridor, a 7,200 km road, rail and ocean route from India to Europe, and has increased trade with the Central Asian republics which see Iran as a market of almost 90 million people and its sea ports as entrepôts for trade with Asia, Africa, and the Middle East.

Another weight on Iran’s economy is water as Iran is one of the driest countries in the world. On the agenda with Afghanistan is access to water rights under the 1973 Helmand River Treaty which was never fully implemented due to Afghanistan’s internal conflicts that started with the 1978 Communist-led coup d’état and only ended with the expulsion of NATO in 2021.

Regional Influence: Iran’s regional influence may continue to decline as the weakening of Hezbollah and Hamas, and the fall of the Assad regime in Syria have reduced Iran’s strategic footholds. The defeats of Iran’s proxies has led many Iranian citizens to criticize their government for spending money on foreign adventures and not addressing unmet needs in Iran.

Disillusionment among Iranians may lead to domestic unrest if many citizens feel their country’s wealth, nearly $20 billion according to an Islamic Revolutionary Guards Corps leader, was wasted in Palestine, Lebanon, Syria, Iraq, and Yemen

Nuclear Tensions: Iran’s nuclear program remains a topic of international concern and the top issue for Iran’s leadership. Renewed negotiations, scheduled to start on 13 January, and a key Joint Comprehensive Plan of Action (JCPOA) deadline may force the pace of negotiations.

In 2018, the U.S. withdrew from the JCPOA and reimposed sanctions that had been lifted or waived, though the European Council “lifted all nuclear-related economic and financial EU sanctions against Iran” after the International Atomic Energy Agency verified Iran implemented the JCPOA measures.

Despite predictions of Maximum Pressure 2.0, in January Trump signaled he would like a negotiated agreement, “it would really be nice if that could be worked out without having to go that further step.” But now it looks like Maximum Pressure is back as Trump may sign an executive order (EO) to rescind existing sanctions waivers and “[drive] Iran’s oil exports to zero.”

Trump’s impending action may have been prompted by an intelligence report that Iran is working on an option to quickly develop a crude nuclear weapon, though the report also noted that the Supreme Leader Ayatollah Ali Khamenei has not made a decision to develop a nuclear weapon. The nuclear story will swamp a report that Iran’s reformers want to increase the transparency of the country’s financial system to rejoin the global economic system.

China imports about 1.75 million barrels of oil per day from Iran, so China will see this as a “two-fer” by which America attacks China and Iran, regardless of what rationales are in Trump’s EO about terrorism and weapons of mass destruction. And should the U.S. decide to start interdicting the “shadow fleet,” will China respond by declaring America’s actions as piracy, then reflagging and escorting the tankers? The People’s Liberation Army Navy (PLAN) is the world’s largest with a battle force of 355 modern ships and submarines. U.S. escalation will give the PLAN an opportunity to develop “out of area skills,” claim that it is the new guarantor of freedom of navigation, and build support with the Chinese people.

Also, if China suffers from a lack of oil from Iran, Beijing can claim that any future economic downturn is the fault of Washinton and not missteps by the Communist Party of China.

Trump hopes Iran will fold as quickly as Canada and Mexico have in the face of U.S. threats, but if Iran resists and eventually shots are fired the ensuing conflict will distract Trump from his domestic reform agenda and focus on China, spike oil prices and increase costs for businesses and consumers worldwide, increase market volatility and reduce investor confidence, and disrupt trade routes and supply chains.

Trump was elected (twice) as he was against “endless wars,” and he pilloried then-President Joe Biden for economic mismanagement that ignited ruinous inflation in the U.S., so he will have to tread carefully to avoid another war of choice in the Middle East. If not, Joe Biden has his “I told you” tweet ready to go.

After his election in June 2024, President Masoud Pezeshkian of Iran announced his program in “My Message to the New World” and declared his intent to strengthen relations with Iran’s neighbors. He emphasized the need for a “strong region,” said he hoped for “constructive dialogue” with Europe, criticized the U.S. for exiting the JCPOA, and urged Washington “come to terms with reality.”

Iran’s Supreme Leader Ayatollah Ali Khamenei has also signaled his openness to talks with the Trump administration.

In October 2024, then-candidate Trump declared, “I would like to see Iran be very successful. The only thing is, they can’t have a nuclear weapon.” And then-Vice-President candidate JD Vance said, “And our interest very much is in not going to war with Iran. It would be a huge distraction of resources. It would be massively expensive to our country.”

Though the leaders in Tehran and Washington look ready to talk, and Trump has declared his red line, hard-liners in Washington and Jerusalem favor a pre-emptive attack on Iran’s nuclear program – their desires made more urgent by the expiration of the JCPOA sanctions “snap back” mechanism on 18 October 2025.

If Trump’s only red line is the development of nuclear weapons, not nuclear research and development, the export of missiles or drones, or support for Russia’s war with NATO taking place in Ukraine, and he publicly opposes regime change in Tehran, Iran will be ready to negotiate. However, Trump will face resistance from Israel and its American supporters, who perpetually claim Iran is “weeks away” from building a nuclear weapon.

If Trump wants to broaden a deal with Iran to include military support to allies and the behavior of proxies, Iran may suggest the U.S., do the same with its proxy, Israel, and may up the ante by proposing a nuclear-free zone in the Middle East which will be a non-starter with the American and Israeli hawks.

But it is not 2018, and Iran has sealed strategic partnership deals with China (in 2021) and Russia (in 2025), giving it political and economic resources it lacked in 2018 when the U.S. exited the JCPOA. Though Russia does not have the naval assets to protect Iran’s oil exports, China does and may be think it is facing a spent American force that is best known for collisions at sea, shooting down its own aircraft, and poorly maintained vessels.

And the oil market is different also.

According to Argus Media, Iran’s oil exports, which were below 500,000 b/d through the second half of 2019 and 2020 due to Trump-era sanctions, began increasing in 2021 and have increased every year since.

Iran has expanded its network to bypass sanctions, and has grown its (now sanctioned) tanker fleet, so if the U.S. increases sanctions, it will find the remaining buyers are “those who do not necessarily fear sanctions,” and China may deploy its battle force to protect its oil supply.

Hopefully, someone in Washington will crack open a history book and remember that Japan went to war with the U.S. in 1941 because Washington imposed an embargo on oil imports that Tokyo needed to fight, ironically, China.

Iran’s challenge is to frame a deal that Trump believes only he could have delivered, and to ensure that Washington will not flounce out of the deal in the future. So, Iran may insist on a treaty rather than an “understanding” which will require Senate ratification where some parts of the deal will likely be rejected, necessitating more negotiations between Tehran and Washington, settling once and for all who is the master of “the art of the deal.”

By Yasmina Ashurova and James Durso for Oilprice.com

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