Iran and the United States are both under significant economic pressure and have expressed a willingness to de-escalate. Yet neither side has shown signs of softening its core demands. Instead, developments stretching from the Strait of Hormuz to Yemen and Saudi Arabia are reinforcing the positions of competing factions in Washington and Tehran, while making diplomacy increasingly difficult.
That is the central assessment of The Soufan Center, whose September 17, 2026 IntelBrief describes a conflict in which both sides continue to believe they possess meaningful leverage, even as the economic and military costs mount. The danger is no longer simply that negotiations may fail. Continuing exchanges between U.S. and Iranian forces, including a U.S. strike on Islamic Revolutionary Guard Corps (IRGC) fast-attack boats on Monday, could at any time escalate into major combat.
After repeatedly expressing disinterest in new negotiations with Tehran, U.S. President Donald Trump said on Monday that he was once again open to talks with Iran. Writing on his Truth Social media account, Trump stated: “The failing Nation of Iran wants to make a deal, quickly and badly. I will determine whether or not the U.S.A. will choose to engage – The concept of which we are open to.” His statement followed comments by Energy Secretary Chris Wright, who told Bloomberg News on Sunday that a renewed focus on the issue at the centre of the U.S.-Iran conflict — Iran’s nuclear program — might produce progress.
Wright restated U.S. proposals for a nuclear agreement under which Washington would supply Iran with nuclear fuel if Tehran eliminated its uranium enrichment programme. “We prefer to negotiate,” he said. “Or, they can continue to have a covert, buried, lied-about, hidden nuclear weapons program and face the U.S. military, which will ensure they do not develop nuclear weapons…We can supply fuel from outside the country. They could join the community of nations again and bring peace and prosperity to their people.” Yet the administration has not articulated a specific softening of its wider demands, particularly its insistence on the unfettered reopening of the Strait of Hormuz without Iranian or regional fees or tolls on commercial shipping.
Washington’s confidence that it can secure an agreement without further meaningful concessions has been strengthened by developments over the summer. U.S. Navy operations are guiding increasing volumes of energy exports through the Strait, while U.S. officials say American forces and Arab Gulf countries have begun conducting daytime tanker transits, in addition to the nighttime passages used in recent months. U.S. forces have also expanded the mine-cleared portions of the Strait’s middle shipping lane.
At the same time, U.S. officials assess that Iran’s economy is buckling under the weight of a U.S. naval blockade and crippling economic sanctions. The value of Iran’s currency has declined dramatically in recent weeks, while civilian leaders have acknowledged sharp economic deterioration and warned of political unrest if conditions do not improve.
But economic pressure has not translated into Iranian concessions. To preserve U.S. leverage, American officials have continued demonstrating their willingness to use force, despite accepting that there is no military solution to the conflict. On Monday, the U.S. military destroyed two Islamic Revolutionary Guard Corps – Navy (IRGC-N) small fast-attack craft after they attempted to seize a U.S. Navy drone boat patrolling the Strait of Hormuz.
U.S. Central Command spokesperson Captain Tim Hawkins confirmed the attempted seizure, saying: “Iranian small boats recently attempted to take possession of a U.S. unmanned surface vessel, but they were unsuccessful after CENTCOM forcefully responded…The surface drone remains under U.S. operational control.”
Iran, meanwhile, has shown little indication of changing course. The IRGC has continued attacking ships transiting the Strait, restricting exports through the waterway and increasing the possibility of further exchanges with U.S. forces. At the same time, Iran’s regional allies have demonstrated that they retain the ability to affect the strategic balance.
The most significant development has come from Yemen, where a ground advance by the Iran-backed Houthi movement has positioned the group to close the Bab el-Mandeb Strait through direct weapons fire. The Houthis and Iran-aligned militias in Iraq have also attacked Saudi energy infrastructure, damaging pumping stations connected to the East-West pipeline that carries Saudi oil to the Red Sea while avoiding the Strait of Hormuz. The attacks have contributed to a sharp rise in world oil prices over the past ten days, with diesel fuel prices reaching all-time highs.
President Trump, reluctant to expand U.S. operations in the region and following reported U.S.-Houthi talks in Muscat, has not intervened directly to help Saudi Arabia and its Yemeni allies counter the Houthi gains. The developments have strengthened the position of Iranian hardliners who believe sustained pressure can ultimately force Washington to end the war on terms favourable to Tehran.
IRGC Major General Mohsen Rezaei, Secretary of the Supreme National Security Council, reiterated that position on Monday. “The stakes around oil and the straits have changed. Damage control won’t stop what’s coming. No talks until Iran’s conditions are met. Period!” he told state media.
Tehran is demanding that Washington fulfil its obligations under the June U.S.-Iran Memorandum of Understanding before the diplomatic process resumes. Its stated preconditions include lifting the naval blockade, unfreezing Iranian frozen assets, removing U.S. military assets from “proximity” to Iran and forcing Israel to end its military assaults on Lebanese Hezbollah and Hamas.
Rezaei’s position contrasts with that of more moderate civilian leaders, particularly elected President Masoud Pezeshkian, who has warned that U.S. economic pressure could trigger another popular uprising. Speaking to India Today on Saturday, Pezeshkian said: “We are ready for dialogue,” while insisting that nuclear negotiations should take place within the framework of the Nuclear Non-Proliferation Treaty and international law.
Pezeshkian has also called for a return to the June MOU, arguing that there was no reason to begin negotiations again from the beginning. “I don’t know what was wrong with what we wrote in Pakistan [the MOU, also known as the Islamabad Agreement] that the United States now wants us to talk again from scratch…What was illogical there? What did we say that was outside the logical, legal, and scientific frameworks recognized in the world?” he said.
Yet the contrast between Pezeshkian’s call for dialogue and Rezaei’s uncompromising position reflects the continuing struggle over Iran’s negotiating posture, with hardliners retaining the political upper hand in Tehran’s decision-making, at least for now.
Regional diplomacy had offered a possible route out. Mediators had looked to discussions between Iran and Oman over the management of the Strait of Hormuz as a means of bringing Washington and Tehran back towards the June MOU and bilateral negotiations. Iranian officials had agreed to attend a meeting with Arab Gulf monarchies in Salalah, Oman, to examine an Iran-Oman agreement on shipping routes through the Strait.
The proposed arrangement included voluntary contributions from shipping companies using the Strait to fund environmental cleanup and other costs. The plan was to be registered with the United Kingdom Maritime Trade Operations Center (UKMTO), suggesting that Iran had accepted that arrangements governing the Strait needed to comply with international law.
But the diplomatic opening collapsed. Iran’s Foreign Minister Abbas Araghchi said that Iran would not reopen the Strait until the United States met Tehran’s demands. Trump dismissed the prospect that the Salalah meeting would produce a war-ending settlement. Bahrain said it would boycott the meeting because it had not restored diplomatic relations with Tehran, while Saudi Arabia resisted meeting Iranian officials as Houthi forces continued attacking the Kingdom.
Iranian Foreign Ministry Spokesman Esmail Baqaei confirmed that Riyadh had asked for the meeting to be postponed: “The report that Saudi Arabia requested that the meeting not be held for now is correct.” Oman’s foreign minister, Sayyid Badr Albusaidi, subsequently said the meeting had been postponed “in the interests of consensus.”
The collapse of the Salalah initiative leaves regional mediators, as well as U.S. and Iranian officials, without an obvious roadmap for defusing the conflict. The United States is attempting to preserve leverage through military pressure and economic coercion, while Tehran continues to use the Strait of Hormuz, its regional allies and the pressure on global energy markets as sources of leverage.
The result is a conflict in which diplomacy remains possible in principle but increasingly difficult in practice. Trump has reopened the door to talks, while Pezeshkian says Iran is ready for dialogue. Yet the core demands on both sides remain largely intact, the regional diplomatic channel has stalled, and military encounters continue.
As The Soufan Center’s assessment makes clear, the absence of an agreed off-ramp leaves the conflict exposed to another escalation. With Washington and Tehran still unwilling to surrender the principal sources of leverage they believe can deliver their preferred settlement, the pathway towards an end to the war remains uncertain.
