On 29 July 2026 Axios – a publication with known ties to the Trump White House – reported that US President Trump, in one of his recent meetings with the Israeli Prime Minister, expressed concern about the severe repercussions of the Middle East war on the global financial system.
Was this admission the reason behind a change in the US President’s strategy revealed during a phone call with Axios when he was quoted as saying: “we are low keying it” — defined as allowing economic pressure to achieve the (changing) war objectives rather than launching a new military offensive. He added that “we are only semi-negotiating with them, we are just watching Iran with its huge inflation and the fact that they have no money.”
The new low keying approach is not going to arrest or begin to reverse the supply disruptions associated with the conflict unless shipping in the Strait is restored to pre-28 February levels – a restoration that remains stalled due to Iran’s refusal to allow the waterway to return to pre-conflict operational freedom and the concurrent continuing US naval blockade.
In this context it is relevant to note a recent Iranian policy shift: instead of retaliating measure for measure Iran initiated attacks on 9 August (weekend) on two ships and then again the following Monday morning which checkmated President Trump’s erstwhile weekly strategy notably to announce an impending deal on Sunday with markets plummeting early Monday, that he purportedly closely watches, followed by a rise during the rest of the week as the President ordered attacks on Iran. So far there has been no US retaliation.
Meanwhile, the US consumers continue to be subjected to global supply disruptions that have raised prices domestically, given the rise in price of imported sour oil (refined to produce diesel and aviation fuel) as opposed to domestically produced abundant sweet oil though typically US refineries mix the two oils to maximise output yields, liquefied natural gas from mainly Qatar (plus helium, a high value by product during LNG processing and critical for advanced technology including semiconductors, fibre optics, aerospace and medical MRI), urea and ammonia, plastics, polymers, acyclic alcohols, and specialty industrial chemical derivatives. Be that as it may, the impact on US consumers, particularly with respect to food prices due to rising fertilizer prices, does not highlight the probability of poor to lower to even some middle income nations highly dependent on fertilizers from the Gulf states being pushed into famine as their fertilizer stockpiles erode.
The question is why this shift in US policy towards low-keying the conflict? One reason as indicated by President Trump is his implied belief that sanctions will work this time around. Iran has been a sanctioned country for over 47 years, sanctions that it reportedly partly circumvented through its dealings with the United Arab Emirates (UAE), a source no longer available to Iran.
However, recent geopolitical tectonic shifts continue to weaken the weaponised sanction system led by the US and its Western allies that include: (i) imposing severe penalties against offending companies and countries consisting of assert freeze, trade restrictions, and disallowing the use of SWIFT (Society for Worldwide Interbank Financial Communication).
China recently publicly directed its companies dealing with sanctioned Russia and Iran to disregard US sanctions and there has been a dramatic rise in the use of the Cross-border Interbank Payment System (CIPS) launched by China in 2015 – digital a system which processes cross border and domestic transactions dominated by Yuan that is quicker and more efficient; (ii) the petro-dollar system supported by the Gulf countries that cited oil price only in dollars is eroding after Iran began taking payments from the Hormuz traffic, as and when allowed, in Chinese currency or in crypto.
Additionally, with energy exports from the Gulf down dramatically two of Gulf states are facing a liquidity crisis – the UAE first sought US support with an implied threat that unless a swap was arranged they would be compelled to liquidate US treasuries they held (that enabled the US access to trillions of dollars each year at ridiculously cheap rates).
Currently, Saudi Arabia is facing a liquidity crisis and holds about 1.3 trillion dollars in US treasuries that, if liquidated, would plunge the US dollar. The outcome of these geopolitical changes compelled Treasury Secretary Scott Bessent to do a Janet Yellen or, in effect, to lean hard on the cheap treasury-bills to fund the budget deficit.
On 5 August 2026, the yield on the three-month bill was 3.8 percent, for a ten-year bill 4.6 percent and 30-year bill above 5 percent. Bessent leant unusually hard on the cheaper rate and financed roughly 2 trillion dollar deficit however while this kept the budgeted borrowing costs low, yet it exposes US consumers to higher inflation and rising rates; and (iii) BRICS (Brazil, Russia, India, China and South Africa) with a current membership of 21 countries, including Iran, with others applying for membership, under consideration, is regarded as the new powerhouse multilateral economic grouping that would further erode the effectivity of sanctions regimen.
Another reason, supported by a growing body of literature — some independent while others are sourced to officials who do not wish to be named — maintain that the US is facing a munitions shortage at present. Centre for Strategic and International Study’s estimates are as follows: (i) roughly two-third of Patriot interceptors and 60 percent of THAAD inventory has been used; (ii) significant depletion of ATACMS and Precision Strike Missiles; and (iii) replenishment times to attain pre-conflict levels are estimated from several months to several years many of which are subject to imports from China of critical minerals, rare earths, that are suspended at present. When asked, President stated “we need more all the time….we have certain types of munitions that are very powerful of which we have unlimited, virtually unlimited supply. We have others where it’s a little bit tighter and we are getting them on a daily basis.”
The key ask by analysts at present is which of the two countries is able to withstand pressure for a longer period. Iranians have clearly rallied around the flag after the decapitation on 28 February, brutal attacks on its civilians and associated infrastructure and almost daily verbal insults by Trump.
The American public is largely opposed to the war; however, the earlier projection that Republicans may lose the mid-term polls which may well initiate an impeachment of the President, a fear he voiced a few months ago, is no longer considered a foregone conclusion due to two factors.
Trump may succeed in convincing Congress to pass the Save Act which would give greater control to the federal government over elections by claiming that his defeat in 2020 was illegitimate; some of his base is urging him to declare a state of emergency in case the Act is not passed till the mid-terms to circumvent electoral laws.
And the Democrats remain divided with a number of left wing socialist candidates succeeding in challenging the party establishment’s continued support for the status quo in recent primaries (particularly for the Israeli genocide) an example being El Sayed win in Michigan. It may be recalled that the only part of Trump’s State of the Union address this year that was roundly supported by Republicans as well as Democrats was support for Israeli genocide.
To conclude, many may see similarities between actions taken by the US and Pakistan; however, one major point of departure is that while the US is a superpower, even if it is now struggling to keep the dollar hegemony in place that enabled it to borrow very cheaply, Pakistan has been borrowing massively to ensure the continued elite capture of its very scarce resources (through fiscal and monetary policies). And sadly continues to do so to this day.
Copyright Business Recorder, 2026
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