The Middle East grapples with the downsides of a Trump deal with Iran

For Israel and the Gulf, the risk is an emboldened Iran after U.S. forces leave

- Summer Said, Georg Kantchev & Anat Peled

A man walks past a mural of the US flag on the wall of the former US embassy in Tehran.

(BLOOMBERG)

The Middle East was bracing Sunday as the Trump administration worked to finalize an agreement that would head off further conflict with Iran, but could come with significant downsides for the region.

There was widespread concern in Israel that the deal—a memorandum of understanding that would get oil tankers and other traffic flowing through the Strait of Hormuz but put off the question of Iran’s nuclear program until later—would ease the economic and military pressure on Tehran when a regime Israel considers an existential threat is at a weak point.

Gulf Arab states, meanwhile, were eager to avoid further attacks on their energy facilities and get their oil sales moving again, but were grappling with the prospect that a deal would leave Iran with an overt role managing the strait and emboldened to use military threats to get its way in future disputes with its neighbors after the U.S. armada moves on.

Even in markets, which are certain to cheer the reduced risk that fighting could further crimp energy supplies, analysts were hungry for details of how quickly traffic would be let through the Strait of Hormuz and whether a deal could leave the strategic waterway more vulnerable to future disruptions.

“It feels like a breakthrough, but we’ve seen some of these points before and they always broke down once it got to competing interpretations of the details,” said Rory Johnston, founder of oil research firm Commodity Context.

Mediators said they had hammered out a memorandum with Iran that would maintain the pause in fighting for at least 60 days and have passed it along to the U.S. for consideration. In essence, it would extend the current cease-fire while the two sides reopen the Strait of Hormuz and begin talks on Iran’s nuclear program.