Washington and Tehran seem to edge towards a diplomatic resolution

Good afternoon, friends. A couple of days after the US midterm elections, it seems that Washington and Tehran are edging towards ending their war, even as Hormuz remains gridlocked.

US President Donald Trump told the Financial Times he has no immediate plans to order new strikes, saying “we seem to be getting everything we want.” But even as he — and Vice President JD Vance — acknowledged that the war was “largely true” as a cause of Republicans’ sweeping losses on Tuesday, he maintained he “would have done it again.” Iran’s chief negotiator Mohammad Bagher Ghalibaf read the result the same way: “Americans said NO TO WAR, and we endorse this message.”

Iran has sent Washington a nuclear proposal through Qatar, to be discussed only once its seven demands are met, a senior Iranian official tells Reuters. Supreme National Security Council secretary Mohsen Rezaei, speaking in Russia, said that “as long as they do not execute our seven conditions, we will neither open the Strait of Hormuz nor have negotiations.” The demands include lifting US sanctions, releasing frozen Iranian assets and war reparations, and Washington has said nuclear issues must form part of any initial talks. Rezaei also called America’s response to Iran’s demands “not convincing.” Qatari spokesman Majed Al Ansari said both sides remain committed to the process and that Doha is running a real-time exchange of proposals, with mediators expecting feedback on a new suggestion within 36 hours.

What’s happening in the water hasn’t caught up with any of that. The Revolutionary Guards said four oil tankers caught fire after striking mines while attempting what it called a prohibited passage south of Hormuz on Wednesday, with two further vessels halted, France 24 reports. UKMTO reported two projectiles hitting a tanker’s engine room about 14 nautical miles off Limah, Oman, on Tuesday, and another tanker struck some 50 nautical miles north of Madinat ash Shamal in Qatar yesterday, when the IRGC said two tankers and a tugboat were alight.

Brent has been holding below USD 100 since Wednesday for the first time since September, trading around USD 94 this morning, more than 8% below Tuesday’s close of USD 103, even as tankers were burning in the strait that same day. The price movements suggest markets are trading on the results of the elections, rather than the shipping route.

MEANWHILE- Cairo is budgeting on the war continuing. The Madbouly Cabinet approved a draft decree yesterday rationalizing public spending across the state budget and public economic authorities for three months, citing developments in the Middle East and the need to rearrange spending priorities. The measures include rationing government consumption of electricity and vehicle fuel, freezing goods and services allocations, postponing diesel-heavy national projects, and holding off on new investment projects and contract awards until the next fiscal year. Any spending with a foreign currency component now needs Finance Ministry sign-off coordinated with the central bank, and contracting that could later require external borrowing or additional FX is barred outright.

Not being cut: Health, education, interior, pensions, Takaful and Karama, Haya Karima, subsidised food, fuel supply and national, water, food, cyber and energy security spending are exempt. –Salma