NEW YORK — U.S. President Donald Trump has again signaled a large-scale air campaign against Iran as the U.N. General Assembly convenes, while leaving open the possibility of the first summit between the two countries since the war began. Global financial markets are paying closer attention to the prospect of a U.S.-Iran summit — a newly emerging variable — than to the strike threats Trump has repeated for months. Because the two leaders' schedules partly overlap during the assembly, some observers see the potential for a surprise turning point. The difficulty is that the war has now dragged on for seven months since Feb. 28 local time, making it hard to halt through a single meeting. As with the ceasefire memorandum of understanding that took effect on June 18 only to be nullified almost immediately, the two sides remain far apart on dismantling Iran's nuclear program, removing highly enriched uranium and control of the Strait of Hormuz. Iran also has a de facto ruler above its president in Supreme Leader Ayatollah Sayyid Mojtaba Khamenei, and hardliners in the military, including the Islamic Revolutionary Guard Corps (IRGC), wield considerable influence. One encouraging element is that the leaders of both countries, along with Israeli Prime Minister Benjamin Netanyahu and Chinese President Xi Jinping, will all be in the United States for the first time since the war started. With U.S. midterm elections approaching, how Trump uses this last opportunity for multilateral diplomacy on the Middle East has become a central question for markets.
Trump: Could Blow Iran Away, but Open to Talking With Its President at UN
Fox News reporter Trey Yingst said on the network on the 20th that he had just spoken with Trump by phone, and that the president said he was in "decision mode" and that something very big would happen in the near future. Yingst said Trump laid out his current options as wiping out Iran, strangling it economically or reaching a deal, and quoted him as saying that the question is when the entire country would be blown away, so they had better behave. Yingst added that on whether Trump would meet Iranian President Masoud Pezeshkian at the General Assembly, the president said he would "probably be open to it." The remarks reflected the mix of pressure and inducement Trump has used throughout.
Global financial markets focused more on the summit possibility, since comments about military pressure and economic isolation have been repeated countless times over the seven months since the war began. On the 21st, Brent crude futures for November delivery on the ICE Futures exchange in London settled at $100.34 a barrel, down 3.4% from the previous session — the largest single-day decline since the 25th of last month. West Texas Intermediate futures for October delivery on the New York Mercantile Exchange fell 4.5% to $95.78 a barrel. Both benchmarks marked their lowest levels since the 8th, when Brent settled at $97.92. With oil prices steadying, the Nasdaq Composite rose 2.26% to a record high, while the Standard & Poor's 500 gained 1.49% and the Dow Jones Industrial Average added 0.71%.
Trump is scheduled to speak on the 22nd, the opening day of the General Assembly, while Pezeshkian's address is set for the following day, the 23rd. There is time for the two to cross paths in New York before Trump greets Xi on the tarmac at Joint Base Andrews near Washington on the afternoon of the 23rd. Netanyahu, another central figure in the war, is due to take the podium on the 24th. He has repeatedly signaled his intention to travel despite threats from New York Mayor Zohran Mamdani, a Muslim, to arrest him on the basis of an International Criminal Court warrant. New York City, as a local government, has no independent legal authority to execute an ICC arrest warrant.
Trump, who had arrived at the Camp David retreat on the 18th, originally planned to return to the White House on the 20th but came back a day earlier on the 19th, as if signaling decision mode. In June last year, he received briefings on military options against Iran from security advisers and generals at Camp David in Maryland and, 13 days later, ordered strikes on three Iranian nuclear facilities. That suggests he could soon settle on a new approach to Iran, whether military, economic or diplomatic. Mohsen Rezaei, secretary of Iran's Supreme National Security Council, said in an Al Jazeera interview on the 19th that Tehran had conveyed its conditions for resuming ceasefire talks to Qatar, the mediating country.
Yingst also said Trump indicated he remained in contact with Yemen's pro-Iran Houthi rebels and that they had agreed not to fight the United States. The State Department issued an alert on the 19th urging Americans in the Middle East to heighten their vigilance. The Houthis attacked Saudi Arabia's East-West pipeline, an alternative crude export route, on the 10th, then struck the capital, Riyadh, on the 19th. They now effectively control the Red Sea coast and the Bab el-Mandeb Strait at its entrance, putting Saudi export routes at risk.
U.S. Fuel Prices at Record High, Iran's Economy Shrinks 10%, and Ceasefire Terms Unchanged
Market participants place at least some hope in a Trump-Pezeshkian summit because conditions in both countries make simply letting the war continue increasingly untenable. Meeting on the margins of the General Assembly is also a far easier path than arranging a separate encounter later.
For the United States, the problem is rising defense spending and surging domestic energy prices as the war drags on. With traffic through the Strait of Hormuz sharply reduced and oil above $100 a barrel, inflationary pressure is spreading across the economy. That is a serious liability for Trump and the Republican Party ahead of the Nov. 3 midterm elections.
According to the American Automobile Association on the 20th, the national average retail price of diesel stood at $6.505 a gallon (about 3.79 liters) as of the 19th. After breaking the $6 barrier for the first time at $6.06 on the 11th of this month, it rose another 50 cents in less than 10 days. Since the war with Iran began on Feb. 28, diesel has climbed about 70%. Because diesel powers core U.S. logistics as well as farm machinery, ships, trains, generators and heating, its price feeds broadly into overall inflation. Bloomberg reported the same day that rising diesel prices ahead of the midterms could erode Republican support in farm states such as Iowa and in Maine, which relies heavily on heating oil.
Iran's economic situation is far more severe. Iran's Statistical Center said on the 21st that real gross domestic product in the first quarter of the Iranian year, from March 21 to June 20, fell 10.1% from a year earlier. That is close to the 11.0% contraction in the fourth quarter of 2018, after the United States unilaterally withdrew from the Joint Comprehensive Plan of Action nuclear deal and tightened sanctions on Iran. The latest period overlaps entirely with the war. Crude oil and natural gas output fell 26.4%, while mining and manufacturing declined 14.7% and agriculture contracted 2.3%.
Both countries have ample motivation to seek a diplomatic solution such as a summit, but the obstacle is the difficulty of finding common ground. Iran still insists on an end to fighting on all fronts, including the Lebanon conflict involving Israel, the release of frozen funds, the lifting of oil export sanctions, recognition of its control over the Strait of Hormuz and an end to the naval blockade. That amounts to no real change from its position when the June memorandum was signed. The conditions Rezaei recently passed to mediators for resuming ceasefire talks are believed to have largely repeated those demands.
Unlike financial markets, Iranian hardliners reacted more sharply to Trump's talk of blowing the country away. Khatam al-Anbiya Central Headquarters, which directs Iran's armed forces, said in a statement on the 20th that the United States had decided once again to resume action against Iran, and warned regional countries not to cooperate. The IRGC said in a statement the same day that if the United States actually carried out an attack, Iran would strike back at every U.S. military base in the Middle East. Rezaei went further in a speech on the 20th, stressing that retaliation would extend to naval forces in the Indian Ocean. Mohammad Bagher Ghalibaf, the parliament speaker who heads Iran's negotiating team with Washington, said in an opening address to a plenary session the same day that unless Iran's conditions were met, the legitimate rights of the Iranian nation recognized and the United States willing to implement them, there would be no room to return to negotiations or to reopen passage through the Strait of Hormuz. He added that Iran's position in the diplomatic arena was extremely clear and not subject to compromise, and that its demands and messages had been conveyed transparently and firmly through mediators.
Saudi Crown Prince Calls Trump Again on the 17th Seeking Strikes on the Houthis, but Widening the Front to the Red Sea Poses a Dilemma
Other countries in the Middle East face crises of their own. CNN reported on the 19th that discontent is growing among Middle Eastern states as the U.S. government hesitates to intervene militarily even as the Houthis intensify their offensive against Saudi Arabia. Confidence in U.S. security support is eroding, particularly among Gulf states. According to the U.S. online outlet Axios, Saudi Crown Prince Mohammed bin Salman Al Saud called Trump twice on the 10th to request airstrikes on the Houthis and was turned down.
Trump is reluctant to wade into the Houthi issue because responding to Iran around the Strait of Hormuz alone is already imposing enormous military and fiscal costs. The wider the front, the bigger the problems to manage, leaving him exposed to Democratic attacks in the midterms. Another burden for Washington is that Saudi Arabia's military response capability has proved far weaker than expected, unlike Israel's. Speaking to reporters after meeting Irish Prime Minister Micheál Martin in Dublin on the 12th, Trump said the Houthis had told him they did not want to fight the United States and were letting most vessels pass except those of one country, Saudi Arabia.
Even so, Washington cannot simply stand by, and the Trump administration's stance has wavered. As Saudi Arabia proves helpless against the Houthis, upward pressure on oil prices is bound to grow. Most military experts see almost no chance that Saudi Arabia can defeat the Houthis on its own given the current state of the conflict.
According to Axios and The New York Times on the 21st, when bin Salman again asked by phone on the 17th for airstrikes on the Houthis, Trump this time discussed the possibility with senior aides at Camp David. Adm. Brad Cooper, commander of U.S. Central Command, which oversees military operations in the Middle East, briefed Defense Secretary Pete Hegseth on scenarios for strikes in Yemen on the 19th.
Trump ordered preparations for strikes on the Houthis, then abruptly rescinded the order around noon on the 20th. Commanders had already approved targets and bombs had just been loaded onto the aircraft assigned to the operation. According to the Times, the reversal followed blunt opposition from most of Trump's inner circle, who cited the strain the Iran war is already placing on U.S. forces. The Times said the episode reflected the bind Trump is in and was presenting him with a dilemma.
With the regional picture this tangled, it is questionable whether Trump has any particular play in mind even if he meets Pezeshkian. Without concrete groundwork for a phased end to the war, a summit could end as political theater. A meeting with Iran's president on the margins of the General Assembly may become major news that captures American attention, but it may also go no further. Iran's state-run IRNA news agency reported on the 21st that the Trump administration had denied visas to some members of Pezeshkian's delegation to the General Assembly, including its press team. Iranian Foreign Ministry spokesman Esmaeil Baghaei called it an act that trampled on the right of access to information, in a post on X, formerly Twitter.
Trump Stocker is a column delivering on-the-ground reporting and analysis on U.S. markets, companies, policy, politics and diplomacy that may help investors during President Donald Trump's tenure. Subscribe to receive these updates on the United States.
