The Iran War at Six Months: The Shift to Economic Warfare and South Korea's Strategic Response

Executive Summary

Six months after the war with Iran began in February 2026, U.S. strategy is shifting its focus from military action to economic warfare. This change is driven by a combination of factors: the depletion of precision-guided munitions, a domestic war approval rating of only 31%, and the structural shift of the U.S. to a net energy exporter following the shale revolution. However, as remarks by Secretary of Defense Hegseth indicate, military options are not entirely off the table. A dual-track approach combining economic warfare with the threat of direct strikes is expected to continue. The most likely scenario for the next six months (50% probability) is a prolonged phase of alternating sanctions and tensions, with Brent crude oil prices forecast to fluctuate in the $88–$95 range. South Korea should adopt a strategy that decouples U.S. demands for joining sanctions and making military contributions in the Strait of Hormuz, preventing them from being treated as a package deal. Seoul should also refrain from preemptively announcing its participation before the sanctions' details are finalized, while continuously monitoring its indirect trade for potential violations.

I. Situational Analysis

The Iran War at Six Months: Background of the Shift from Military Action to Economic Warfare

1. Background and Developments

The current crisis began on February 28, 2026, when the United States and Israel launched airstrikes on targets inside Iran, igniting a full-scale war in the Middle East [8][10]. Since the war's outbreak, the Strait of Hormuz has been under a de facto blockade [8][12]. Before the conflict, this waterway carried approximately one-fifth of the global crude oil supply [8][10][12]. Data from the PIIE shows that an average of 88 commercial vessels transited the strait each day [10].

On June 17, President Trump and the Tehran government signed the 'Islamabad Memorandum,' which called for an immediate and permanent end to military actions on all fronts [8][10]. The U.S. and Iran had previously announced two ceasefires in April and June, but both quickly collapsed [4]. Following the expiration of the Islamabad Memorandum on August 17, the two sides are once again in a factual dispute over transit through the Strait of Hormuz [2][8].

Underlying this structural shift is the change in America's energy status. The shale revolution transformed the United States from a net energy importer to a net exporter. EAI Professor Lee Wang-hwi has pointed out that this transition was predicted as early as 2020 [2]. As Vice President Vance stated, the priority of U.S. policy toward Iran has shifted from 'regime change and the dismantlement of nuclear facilities to stabilizing consumer oil prices' [2]. This can be interpreted as a signal that Washington is departing from its long-standing practice of providing the public good of protecting Gulf sea lanes at no cost to others [2].

2. Current Situation

Approaching the six-month mark of the war, U.S. public opinion is negative about its continuation. According to a Reuters poll, only 31% of Americans support the war [16]. Immediately after declaring an 'economic D-Day,' Secretary of Defense Hegseth stated that the possibility of military strikes at any point in the Strait of Hormuz was not being ruled out [16]. This signals a dual-track approach combining military options with economic warfare.

On August 19, President Trump declared via social media an 'economic war and isolation on an unprecedented scale' [3][5][7]. He justified the action by citing the Iranian regime's refusal to negotiate, claiming, 'No one has given the Islamic Republic of Iran more of a chance to negotiate than I have' [5]. That same day, he warned that any country trading with or supporting Iran would face 'tremendous' economic consequences [4][5].

This shift is also driven by the physical limitations of military operations. The Associated Press noted that the decision was made 'amid dwindling stockpiles of key weapons' [1]. The Atlantic Council characterized this pivot as a revival of the first Trump administration's 'maximum pressure' campaign, but with a key difference: this time, it is accompanied by the credible threat of resuming direct military strikes [3].

Tehran's response has been defiant. Kazem Gharibabadi, Iran's Deputy Foreign Minister for Legal and International Affairs, characterized the new U.S. sanctions push as 'an attempt to cover up previous failures' [13]. He retorted that while the U.S. claims Iran is 'on the verge of collapse,' it is also 'begging its allies for help' [13]. The Iranian government has also publicly warned that it may strike unauthorized oil tankers in the Strait of Hormuz [9][11][14].

Oil prices are directly reflecting this standoff. Brent crude rose to a three-week high of $94.06 per barrel after the sanctions threat was announced [5][10]. EAI forecasts that the price will remain in the $88–$95 per barrel range, fluctuating with alternating phases of negotiation and tension, and that this situation is unlikely to be resolved in the short term [10].

3. Key Actors and Positions

The Trump Administrationis under pressure after failing to achieve its goal of forcing the Iranian regime's capitulation through six months of military operations [5]. Treasury Secretary Besant is demanding binary compliance from allies and China, framing the choice as 'you are either with us or against us' [5][13]. This move, however, appears to be an exit strategy, substituting economic tools for an unachieved military victory [5].

The Iranian Governmentdrawing on its experience of enduring nearly half a century of U.S. sanctions, appears not to perceive these new measures as a novel threat [1]. It is instead turning the U.S. announcement to its advantage by framing it as a 'cover-up for failure' [13]. At the same time, Tehran is employing a calculated strategy of threatening to strike unauthorized vessels in the Strait of Hormuz, aiming to drive up oil prices and pressure Washington for concessions [15].

Chinaas the largest importer of Iranian crude oil, is the de facto target of this economic war. As Iranian Deputy Minister Gharibabadi noted, the new sanctions are designed to affect 'its most important trading partner, China' [9][11][13][14]. Because China accounts for over 80% of Iran's crude oil exports, it is highly likely to quietly find alternative import routes to bypass the sanctions rather than openly defying them [8].

The Gulf Statesface a dual risk in this phase of the conflict. They are simultaneously exposed to the danger of becoming targets for Iranian retaliation and the risk of a security vacuum created by diminishing U.S. security commitments [2][15]. The South China Morning Post has noted that Trump's economic pressure could paradoxically provoke further Iranian aggression in the Gulf [15].

4. Key Issues

The first key issue is the effectiveness of the shift to economic warfare itself. Iran has accumulated half a century of experience in dealing with sanctions [1]. Skepticism exists even within the U.S. policy community as to whether economic sanctions alone can achieve the goal of forcing the regime to capitulate, a goal that military operations failed to attain [3][6].

The second issue is the legal and physical status of the Strait of Hormuz. Following the expiration of the Islamabad Memorandum, the U.S. and Iran have remained in a factual dispute over transit rights [2][8]. Although Iran's unilateral control of passage has become the de facto norm, its unstable legal standing means the risk of an abrupt halt to shipping remains high [8].

The third issue is China's compliance with the sanctions. How Beijing responds to Washington's binary demand will determine the sanctions' practical effectiveness [5][13]. The current consensus is that enforcement will likely be selective and implemented in phases [8].

The reduction of U.S. security commitments remains a structural variable. Analysis suggests this stems less from Trump's personal negotiating style and more from fundamental shifts, such as the expansion of shale production and America's transition to a net energy exporter [2]. As this change is likely to endure beyond the current administration, it is expected to have long-term effects on the strategic calculations of Asian nations [2].

II. In-Depth Analysis

The Iran War at Six Months: In-Depth Analysis of the Shift from Military Action to Economic Warfare

1. Analysis of Root Causes

The primary reason for this strategic shift is the physical depletion of military means. The Associated Press noted that the decision came 'amid dwindling stockpiles of key weapons' [1]. Six months of high-intensity operations have exhausted the U.S. inventory of precision-guided munitions, making it difficult to sustain the operational tempo without ramping up production.

The second cause is domestic political constraints. According to a Reuters poll, only 31% of Americans support continuing the war [16]. Six months in, the initial objectives of regime change or the complete dismantlement of Iran's nuclear facilities remain unfulfilled. The Council on Foreign Relations (CFR) summarized President Trump's predicament as a choice between three unattractive options: 'dramatic escalation, conciliatory de-escalation, or a continuation of today’s messy stalemate' [6]. With a decisive military outcome appearing remote, economic tools have emerged as the primary alternative.

The third cause is a structural factor: the change in America's energy status. The shale revolution transformed the United States from a net energy importer to a net exporter. EAI Professor Lee Wang-hwi has pointed out that this transition was predicted as early as 2020 [2]. As Vice President Vance stated, the priority of U.S. policy toward Iran has shifted from 'regime change and the dismantlement of nuclear facilities to stabilizing consumer oil prices' [2]. This can be interpreted as a signal that Washington is departing from its traditional role of providing the public good of protecting Gulf sea lanes at no cost to others [2].

2. Structural Context

Political Structure

Disagreements over military versus economic options are apparent even within the Trump administration. Immediately after declaring an 'economic D-Day,' Secretary of Defense Hegseth affirmed that the possibility of military strikes anywhere in the Strait of Hormuz was not being ruled out [16]. This indicates that economic warfare is a parallel tool, not a complete substitute for military options. Treasury Secretary Besant is demanding binary compliance from allies and China, framing the choice as 'you are either with us or against us' [5]. This reflects the Trump administration's characteristic approach of prioritizing unilateral coercion over multilateral consultation.

Iran's domestic political structure also warrants attention. Kazem Gharibabadi, Deputy Foreign Minister for Legal and International Affairs, framed the new U.S. sanctions as 'an attempt to cover up previous failures' [13]. He retorted that while the U.S. claims Iran is 'on the verge of collapse,' it is simultaneously 'begging its allies for help' [13]. Since the 1979 revolution, the Islamic Republic has used confrontation with the United States as a core narrative to legitimize its rule. For the regime, appearing to capitulate to economic pressure would carry a higher domestic political cost than enduring the hardship.

Economic Structure

Before the war, the Strait of Hormuz was a transit route for approximately one-fifth of the global crude oil supply [8][10][12]. PIIE data shows an average of 88 commercial vessels passed through it daily [10]. A blockade of this waterway structurally affects not only Iran but all Gulf oil producers and Asian energy importers. Brent crude is fluctuating in the $88–$95 per barrel range [2], and this phase of alternating negotiation and tension is unlikely to be resolved quickly.

China's imports account for over 80% of Iran's crude oil exports [8]. This large share creates a practical constraint, suggesting that Washington's binary sanctions demand will likely have to be enforced selectively and in phases. Responding to the new U.S. sanctions, Iran protested that they would also affect 'its most important trading partner, China' [9][11][14]. This indicates that the target of the sanctions is expanding from Iran alone to the entire Iran-China trade relationship.

Security Structure

The Islamabad Memorandum, signed on June 17, expired on August 17 [8][10]. Its brief two-month validity period highlights the agreement's fragility. Two previously announced ceasefires, in April and June, also quickly collapsed [4]. A pattern is becoming entrenched in which periods of military deterrence and economic pressure alternate, yet neither approach leads to a decisive outcome.

3. Historical Precedents and Comparative Cases

The Atlantic Council characterized this shift as a revival of the first Trump administration's 'maximum pressure' campaign [3]. However, there is a crucial difference: this time, the economic pressure is accompanied by a credible threat of resuming direct military strikes [3]. Whereas the first-term campaign relied solely on economic measures, the current economic warfare comes on top of a precedent of actual airstrikes. This fundamentally changes the credibility of the military threat.

The Associated Press described Iran as a country that has 'endured nearly half a century of harsh U.S. sanctions' [1]. Since the 1979 Islamic Revolution, Iran has repeatedly experienced sanctions of varying intensity. This history means Tehran has developed both a resilience to economic hardship and the expertise to find ways around sanctions. As Deputy Minister Gharibabadi's rebuttal indicates, the Iranian leadership interprets the latest sanctions not as a sign of imminent collapse, but as rhetoric designed to conceal America's military failures [13].

The South China Morning Post pointed out that this economic warfare strategy, like similar efforts in the past, may provoke Iranian defiance rather than submission [15]. Its analysis suggests that the combination of new sanctions, a naval blockade, and pressure on trading partners creates a greater incentive for Tehran to take military action in the Gulf. Such action would aim to drive up oil prices and pressure the Trump administration to retreat [15]. This follows a pattern of past cases where tightening sanctions led to retaliatory escalation instead of compliance.

4. Key Variables Shaping Future Developments

The first variable is how China actually complies. As the importer of over 80% of Iran's crude oil [8], China's response to Washington's binary demand will determine the sanctions' effectiveness. The most likely scenario is quiet evasion by adjusting import routes, rather than open defiance.

The second variable is the intensity of Iran's response in the Strait of Hormuz. Tehran has already publicly warned it may strike unauthorized oil tankers [9][11][14]. As economic pressure mounts, the possibility cannot be ruled out that Iran will use military action in the Gulf as a counter-pressure tactic aimed at driving up oil prices [15].

The third variable is the combination of U.S. domestic opinion and the pace of weapons stockpile replenishment. A low war approval rating of just 31% [16] and depleted munitions inventories [1] limit the Trump administration's political and physical room to revert to military options. As long as these constraints remain, economic warfare will likely continue to be the main instrument of policy.

The fourth variable is the position of the Gulf oil-producing states. The conflict has involved these countries from its outset [4]. The formation of a regional sanctions cordon will depend on whether key producers like Saudi Arabia and the UAE cooperate with U.S. pressure on Iran or choose to distance themselves out of concern for their own security.