US-Iran Ceasefire Collapses Amid Escalating Hostilities

US President Donald Trump declared the US-Iran ceasefire deal, established in June, to be over, following a major escalation of hostilities in the Persian Gulf. This announcement came hours after both countries exchanged strikes. The US launched a new round of "powerful" strikes on Iran in retaliation for a recent attack on tankers in the Strait of Hormuz. In response, Iran's Islamic Revolutionary Guard Corps (IRGC) conducted a joint missile and drone operation targeting 85 sites at important US military facilities.

Trump's Stance on Iran

Speaking at the NATO summit in Turkey, Trump stated he no longer wants a deal with Iran, calling them "scum," "sick people," "vicious," and "violent." He accused Iran of being liars, claiming that while negotiators can continue talks, it is a waste of time dealing with them. Trump emphasized that as far as he is concerned, the deal is over.

Impact on Oil Markets

Key oil benchmarks rose sharply following Trump's statements. Brent front-month futures increased by nearly 6% to $78.7 per barrel, while West Texas Intermediate (WTI) futures rose by nearly 4% to $74.9 per barrel. This followed the US revocation of the general license authorizing the sale of Iranian crude after the tanker attacks, which had previously sent oil prices spiraling by more than 3%.

Revocation of License and Iranian Response

The US Treasury Department's Office of Foreign Assets Control (OFAC) withdrew a June 21 license that had given Iran a two-month reprieve to sell oil during negotiations for a permanent peace deal. Iranian parliament speaker Mohammad Bagher Ghalibaf alleged a major violation by the US of the June Memorandum of Understanding (MoU) that led to the cessation of war, stating that the US action has led to "persistent threats of further strikes" and that violating Iranian adjustments in the strait is also a violation of the MoU.

Ambiguity in the Memorandum of Understanding

Analyst Tony Sycamore noted that the MoU between the US and Iran included provisions aimed at reopening the Strait of Hormuz to commercial shipping but left important details on control and traffic management deliberately ambiguous. Iran maintained that parts of the strait fall within its territorial waters and that it exercises sovereignty over them, while the US position was that the strait is an international waterway with rights of transit passage for all nations. This "fundamental difference in interpretation" was never fully resolved, leading to an "uneven reopening" with tankers resuming transits but Iran periodically asserting its leverage through warnings, inspections, or direct actions when it felt its interests were being undermined.