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On the moonlit night of June 20, 2019, U.S. fighter jets, laden with precision-guided bombs and rockets, were in the air over the Arabian Sea while U.S. Navy warships below prepared missiles for an attack. Their targets: a trio of radar and missile installations in Iran.

Earlier that day, President Trump had ordered the attack in retaliation for Tehran’s downing of an unmanned U.S. spy plane flying in what the Trump administration said was international airspace over the Persian Gulf—an assertion strongly denied by Iranian officials, who said the drone was in Iranian airspace and ignored several orders to leave.¹

But 10 minutes before the strike was to commence, Trump abruptly called it off, explaining later he deemed the likely deaths of some 150 Iranians during the attack a disproportionate punishment. “We were cocked and loaded to retaliate last night on three different sites,” Trump tweeted the next day.²

Trump’s last-minute decision to abort the attack underscores just how close the United States and Iran came to a military clash after more than a year of escalating tensions. Yet, despite what now appears to be Trump’s reluctance to use force against Iran, the two nations remain on a dangerous course toward armed confrontation unless they step back from their respective approaches, say independent analysts and former officials of both countries.

For Trump, who prides himself on being the first U.S. president to seriously confront Iran, a step-back would mean relaxing his so-called “maximum pressure” strategy of harsh economic sanctions aimed at forcing Tehran to permanently end its nuclear program and scrap long-standing regional security policies. For Iran’s clerical leaders, whose long historical memory stretches back to the 1953 CIA-organized coup that toppled their country’s democratically elected prime minister, a change would mean tempering their own escalating campaign of “maximum resistance” to the sanctions, which Tehran regards as yet another U.S. effort at regime change.

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Iran Arms Militants Across Middle East

In the struggle between Sunni and Shiite Muslims in the Middle East, Iran—a Shiite theocracy—has armed and trained Shiite militants in Lebanon, Yemen and Iraq and also backed Sunni armed groups opposing Israel in the Gaza Strip. Saudi Arabia—a Sunni theocracy—supports groups fighting Iran’s proxies. Although all Middle Eastern countries have mixed Sunni and Shiite populations, only Iran, Iraq and Bahrain are predominantly Shiite, but Bahrain is ruled by a Sunni monarch. About 90 percent of the world’s Muslims are Sunnis. Oman’s population is predominantly of the Ibadi sect of Islam but also has some Sunnis and Shiites.

Sources: Seth G. Jones, “War by Proxy: Iran’s Growing Footprint in the Middle East,” Center for Strategic and International Studies, March 11, 2019, https://tinyurl.com/y2j5xn3y; “Mapping the Global Muslim Population,” Pew Research Center, Oct. 7, 2009, https://tinyurl.com/y49kadm7

Both sides insist they do not want a war. Yet domestic political pressures, regional allies’ security concerns and Trump’s unpredictability continue to hinder diplomatic efforts to broker talks between the two countries. If the U.S.-Iran standoff persists, some analysts fear a military confrontation is inevitable, potentially sparking a wider regional war that would send world oil prices soaring and usher in a global recession.

The latest round of U.S.-Iran tensions began building in May 2018. That’s when Trump pulled the United States out of a landmark 2015 agreement between Iran and six world powers, under which Tehran had curtailed its nuclear program in return for relief from international sanctions imposed between 2010 and 2015. The sanctions sought to pressure Iran to curb its nuclear ambitions. Calling the accord “the worst deal ever negotiated,” Trump imposed much harsher restrictions, flexing America’s economic and financial muscle in an effort to make Tehran choose between economic collapse or new talks toward a more stringent accord.³

But Iran rejected any new negotiations unless Trump first returned to the 2015 agreement and lifted his sanctions. And Tehran fought back by harassing and seizing foreign oil tankers in and near the Persian Gulf, downing the U.S. drone and deliberately breaching some provisions of the 2015 accord.

Iran has been plagued by sanctions since 1979, when the United States first imposed them after Islamic militants seized the U.S. embassy in Tehran, the country’s sprawling capital, and held 52 American diplomats hostage for nearly 15 months. After the hostages were released in 1981, the United States lifted those sanctions, but reimposed unilateral trade restrictions and embargoed U.S. military sales to Iran in the 1980s and ’90s in an effort to force Tehran to stop building ballistic missiles and supporting regional militant groups Washington regarded as terrorist organizations. Since the mid-2000s, U.S. and international trade sanctions have aimed to convince Iran to limit its nuclear program.

Trump’s latest sanctions tightened restrictions on Iran’s oil sales and targeted Iranian Supreme Leader Ali Khamenei, other top political figures and Iran’s Islamic Revolutionary Guard Corps, triggering a major escalation in the standoff that jolted world oil markets. A Sept. 14 drone-and-cruise-missile attack devastated two major Saudi Arabian oil facilities, instantly cutting global oil supplies by 5 percent. Iran-aligned Houthi rebels in Yemen claimed credit for the attack as part of their ongoing war with the Saudis, but the Trump administration blamed Iran, which denied responsibility. After weeks of deliberation, Trump imposed sanctions on Iran’s Central Bank and a development fund. In addition, the president ordered a secret cyberattack on Iran’s communications system, U.S. officials say. But Trump kept a U.S. military response off the table.⁴

The attack on the oil infrastructure of Saudi Arabia, the world’s largest oil exporter, appeared to be primarily in response to a Trump administration vow to halt Iran’s oil exports, say Iran analysts. “If one day they want to prevent the export of Iran’s oil, then no oil will be exported from the Persian Gulf,” Iranian President Hassan Rouhani warned last in December 2018.⁵

Iran is being driven to take such risks by the impact of Trump’s sanctions on the country’s oil exports, a major source of Iran’s hard currency earnings, analysts say. In April of last year, just before Trump withdrew from the nuclear deal, Iran exported 2.5 million barrels a day, earning about $60 billion annually, according to Adnan Mazarei, an expert on Iran’s economy at the Peterson Institute for International Economics, an independent Washington think tank. Today, he estimates, the sanctions have reduced Iran’s oil exports to around 300,000 barrels per day, dropping its earnings to around $12 billion this year.

Correspondingly, Mazarei says, since the sanctions kicked in, Iran’s rial currency has lost about 70 percent of its value against the dollar. Inflation runs about 42 percent annually, he says, and the average unemployment rate stands at nearly 12 percent, with youth unemployment at 27 percent. The International Monetary Fund (IMF) forecasts that Iran’s economy will contract by 9.5 percent in 2019.⁶

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Iran’s Dependence on Oil Exports Declines

In an effort to make the economy less reliant on oil exports, which are targeted by U.S. sanctions, Iran gets a growing share of its export revenue from non-oil exports.

Sources: “Merchandise trade matrix—product groups, exports in thousands of United States dollars, annual,” United Nations Conference on Trade and Development, https://tinyurl.com/y3x68yw3; Esfandyar Batmanghelidj, Bourse & Bazaar, Aug. 19, 2019, https://tinyurl.com/y6akna4c

U.S. State Department Special Representative Brian Hook is the Trump administration’s top official handling affairs with Iran.

Tasos Katopodis/Getty Images

Trump’s sanctions also have blocked international banks from conducting transactions in dollars with Iran, significantly curtailing imports of medicine and food. Although those items were exempted from the sanctions, foreign suppliers and banks have backed away from exporting them to Iran. (See Short Feature.)

Yet experts say the Iranian economy, for now, is not about to collapse, because it has diversified over the past four decades. The sanctions have not sparked mass demonstrations against the regime. Though polls show a majority of Iranians blame the Rouhani government’s economic mismanagement and corruption for the country’s fiscal woes, a growing percentage blame the United States and have rallied around their clerical leaders.⁷

“The regime’s narrative about why Iran faces difficulties has shifted from the things that [Iranians are] doing wrong to the difficulties outsiders have created for us,” Mazarei says. “So U.S. responsibility for the sanctions and current conditions has become far more prominent in the minds of ordinary Iranians. And that has created social solidarity.”

Driving the administration’s sanctions policy are a dozen demands that would dismantle Iran’s strong military position in the region, which the United States, its Persian Gulf allies and Israel view as a threat. Formulated last year by Trump’s hawkish then-national security adviser John Bolton and Secretary of State Mike Pompeo, the key requirements include a permanent end to Tehran’s nuclear program, as well as termination of both its ballistic missile development and its support for Shiite proxy militias in Lebanon, Syria, Iraq and Yemen. Analysts agree that those proxies have helped shift the regional balance of power in Iran’s favor by extending its influence far beyond its borders. (See Graphic.)⁸

Trump fired Bolton in September after sharp disagreements over signs the president was straying from Bolton’s hard line and softening his position on Iran, among other issues. But even with Bolton no longer in the White House, Trump’s demands and the sanctions remain.

“If we want to get to a point where Iran’s proxies are weaker and the regime doesn’t have the resources that it needs to destabilize the Middle East, it will require economic pressure,” says U.S. Special Representative for Iran Brian Hook, the administration’s top official dealing with Tehran. “There is no other way to accomplish that goal.”

Among the Democratic candidates vying for their party’s presidential nomination, Sens. Elizabeth Warren and Amy Klobuchar and South Bend, Ind., Mayor Pete Buttigieg have said they would unilaterally return to the 2015 nuclear deal if elected. Former Vice President Joe Biden has made his return conditional on Iran’s full compliance with the agreement, while Sen. Cory Booker has said he will seek “a better deal.”⁹

Analysts say the administration’s policy of relying on economic sanctions, combined with Trump’s reluctance to use military force, has only encouraged greater Iranian defiance and heightened the chances of an eventual military confrontation.

“Iran is incentivized to make riskier decisions, such as conducting additional significant attacks on Saudi oil infrastructure,” according to an October analysis by the Eurasia Group, a Washington-based political risk consultancy. “Tehran could also cross, either intentionally or accidentally, Trump’s main red line: the death of U.S. service members.”¹⁰

Ryan Crocker, who served as U.S. ambassador to five Arab and Muslim countries over a 40-year State Department career, says the intractability of current tensions between the United States and Iran can be traced to Trump’s failure to observe one of the most basic equations in international security affairs: matching means with ends.

“President Trump has shown himself to be a national security minimalist who is not likely to rush to war,” says Crocker. However, he adds, “He and his team are pursuing maximalist ends by demanding the Iranians give up their nuclear ambitions, their missile program and their support cv bc for regional proxy forces. Those things are absolutely integral to the Islamic Republic’s basic essence.”

Crocker continues: “When we put things like that out there as demands, what the Iranians hear is that this isn’t about de-escalating tensions and finding common ground; it’s about removing the Islamic Republic. So they’re going to deliver a maximalist response that our minimalist president isn’t prepared to deal with.”

Amid these challenges, here are some key questions being asked about the increasingly fraught U.S.-Iran relationship: