Iran has been under sanctions for 47 years, has no military allies and nobody sells it weapons. The United States has still not defeated it in battle.
For decades Arab governments built their own defense around the assumption that American forces could and would protect them, and paid for that assumption with bases, weapons purchases and political support. Vali Nasr said the war has shown the United States to be far less capable than advertised, and that the Gulf is now shopping for protection somewhere else.
"The US has lost a lot of ground globally because of this war, and that's always to China's benefit."
Nasr is a professor at the Johns Hopkins School of Advanced International Studies, and this is his second appearance on the show in three months — the first was recorded when the ceasefire signed in June still looked like it might hold. It did not.
I listened to the full interview so you can skip it. 40 minutes of audio, 19 minutes of reading.
Here are the 10 arguments that matter.
👤 Guest: Vali Nasr, Professor at the Johns Hopkins School of Advanced International Studies, returning to the show three months after his last appearance on the same war
🎙️ Host: Anthony Fatseas, who created and hosts WTFinance, a twice-weekly interview podcast on finance, investing and macroeconomics
📰 Published: 9 September 2026 on YouTube (WTFinance) and the show's podcast feed
🔴 YouTube | ⏱️ 40 min | ✅ Time saved: 21 min
Key Takeaways
Iran is the only country in the region that came out of this war better than it went in
On his account everybody else has been strategically downsized, Israel included
What is squeezing Iran's economy is the blockade of its ports, not the new sanctions
He said the sanctions announcement moved the job of defeating Iran from the Pentagon to the Treasury
Economic pressure is making Iran more reckless rather than more willing to settle
Attacks on US ships, on US bases in Jordan and on tankers, plus Houthi strikes on Saudi oil facilities
The best outcome still available to Trump is the situation that existed on 27 February 2026
Reopening a strait that was already open, and taking back control Iran did not have before the war
Killing Iran's commanders produced a younger leadership that has abandoned proportionate retaliation
One commander's formula, as Nasr relayed it: "a whole neck and a head for an eye"
There was never an organized alternative to the Islamic Republic waiting to take over
He said the Shah's son was only ever feasible with American tanks in Tehran, as in Kabul and Baghdad
The Gulf's premise that it is insulated from Middle East wars has been broken
Data centers, AI infrastructure and tourism were all built on it
Arab governments are rebuilding their security around non-American partners
The UAE toward Israel and India, Saudi Arabia toward Pakistan and Turkey
The US cannot replace its most advanced missiles at the rate a long war consumes them
Nasr said it has run out of ammunition against a country it expected to beat in days
1. Where The War Stands
The host opened by noting that their previous conversation was three months ago and asking what had changed since. Nasr's answer was that very little has been settled.
His first line was that nothing has resolved: "Well, the key update is that we're still in the middle of this crisis"
The most intense phase — the first 40 days — ended in a memorandum of understanding between the United States and Iran that functioned as a ceasefire, with a 60-day window to negotiate a full cessation of hostilities. It collapsed quickly
The United States then returned to a larger military campaign, bombing Iran's missile, drone and other military sites, plus some infrastructure in southern Iran, to loosen Iran's grip on the Strait of Hormuz
What followed was a stalemate in which both blockades stayed in place. "That didn't yield much result, and after that we ended up in a period of essentially neither war nor peace — a holding pattern in which Iran had control over the Strait of Hormuz, the United States had a blockade over Iran, neither side was engaged in war, but there was no progress towards ending it either"
That changed two or three weeks before the recording, when Washington announced a new set of economic sanctions. Nasr read the announcement as presentation rather than substance: "Partly it was theater, because he was essentially saying that the US is not going to go back to war, but this was not a retreat — he had found an even better way of defeating Iran, which was economic rather than military." The label the president put on them, in Nasr's account, was "D-Day" sanctions
Alongside the sanctions the United States began pushing to widen shipping through the strait. It has not reopened: "It's not open — the flow of ships is still sporadic, it's not up to where it was before the war, and ships still get attacked"
The holding pattern is now breaking down because the two sides want opposite things from the calendar. "President Trump would like to keep things steady the way they are until the midterm elections in the United States, but Iran has no motivation to allow him to do that, and is escalating in order to force the United States into some harder decision." The decision Iran wants is a return to the table and implementation of the June memorandum. "So we're at the edge of a potentially new phase in this conflict going forward"
2. Why The June Deal Broke
Asked what makes agreement so hard, Nasr described a deal that Washington signed and then declined to carry out.
The June memorandum was lopsided in Iran's favor, and he said so plainly: "When they signed the memorandum of understanding back in June, it looked to be one-sidedly in Iran's favor"
What Iran got: a US commitment to end Israeli attacks in Lebanon, US recognition that Iran would control the reopening of the Strait of Hormuz, waivers for its oil exports, and the return of some frozen assets held in banks around the world
What the United States got in exchange for lifting its blockade of Iranian ports was the opening of the strait, plus a promise that negotiations on Iran's nuclear program and a wider deal would start within 60 days. Nasr's verdict: "It was too good to be true for Iran even at that point"
Trump came under heavy criticism at home for signing, after a large aerial campaign, what Nasr described as a ceasefire agreement "that was essentially a capitulation to Iran." The president, he said, "wasn't happy about it"
None of it was implemented, and each failure fed the next escalation. Israel struck its own deal with Lebanon that gave it an open hand there. "The US never returned any of Iran's frozen assets, and the US began to encourage ships not to coordinate with Iran when using the Strait of Hormuz, which led Iran to shoot at two tankers, and the US used that as an excuse to go back to war"
The aim since has been a replacement deal on better terms. "Washington's hope is that it will break the back of Iran's resistance and Iran would agree to a new memorandum of understanding to end the war that would be much more, if not totally, favorable to the United States"
On the other side of the table: "Iran is defending tooth and nail what it won in June and doesn't want to give it up easily." Where that leaves them, in his words: "So as a result, they're not close to negotiations, and what we're seeing is that both sides are escalating gradually in order to force the other side to blink"
3. Blockade, Not Sanctions
The host raised the sanctions and the language coming from Treasury Secretary Scott Bessent and the president, and asked whether economic measures could actually force an Iranian surrender. Nasr's answer separated the announcement from the mechanism.
He said the new sanctions are close to irrelevant, because the old ones already cover everything. "The US has so extensively sanctioned Iran's economy that new sanctions are not going to make a difference, and new sanctions won't work in the short term anyway"
What is doing the damage is the blockade of Iran's ports. He also drew the asymmetry between the two blockades: "Iran's own blockade of the Strait of Hormuz is much more porous than the American blockade of Iran"
His reading of the Bessent announcements was institutional rather than economic. "So I think the announcements by Secretary Bessent were largely designed at projecting an economic solution to the Iran problem, where clearly the military one had failed — shifting the responsibility of defeating Iran from the Pentagon to the Treasury, from Secretary Hegseth to Secretary Bessent"
The strain is real but not decisive: "I think Iranians are under tremendous economic pressure, but that's not enough for them to throw in the towel, and I don't think they see themselves going down — not yet"
The reason pressure does not produce concessions is that Tehran expects the demands to keep coming. If Iran accepted a lesser deal, he said, it expects "no end to more and more demands" from Trump, and reckons it "may as well just pack their bags altogether"
So the response to economic pressure has been more aggression, not less. Iran has attacked US ships, stepped up attacks on US bases in the region including in Jordan, and hit tankers on the high seas, while its Houthi allies in Yemen have increased attacks on Saudi oil facilities. "So all of it suggests that, for now, Iran's response to economic pressure is more aggression in the hope that it will change America's mind"
The message to the White House, as he described it, is that the plan of coasting to the midterms on economic pressure alone "is not going to work"
4. No Talks, Only Leverage
The host made his own version of the problem: if Washington returns Iran's money, Iran can close the strait again and ask for more, which leaves both sides unwilling to sign anything short of the other's collapse. Nasr agreed and added the missing ingredient.
"Something that's lacking between the two of them is trust, and also they don't talk to each other directly — that's the Iranian decision"
Both sides have concluded they cannot win militarily. "The US basically has given up on the idea that it's going to defeat Iran on the battlefield, or that it could escalate the war with Iran without risking something much bigger for the global economy and for America's own military standing around the world"
That leaves diplomacy, but neither will enter it empty-handed: "They don't want to go to the table to surrender; they want to go to the table to negotiate." The skirmishing in the Gulf and the economic pressure are both attempts to arrive holding something
The risk he named is that leverage-hunting overshoots. "But the danger is that it can get out of hand — this one-upmanship of trying to win leverage could cross a particular red line that could escalate into a war nobody wants"
There is no visible route into talks either: "And it's not very clear at what point this gamesmanship would actually translate into negotiations, because right now there's no contact suggesting they're anywhere close to starting talks"
5. Not A Forever War
The host asked whether this becomes another open-ended American war like Afghanistan or Iraq — without ground troops, but with an indefinite economic front and oil rising again.
Nasr said the ground-war option was considered and rejected. "I think President Trump came to the edge of going into a much bigger war, which ultimately would have required troops on the ground, and he backed away — that's exactly why he pivoted from a military solution to an economic one"
The economic version cannot run indefinitely either, because of what it costs both economies: "So this cannot be a forever economic war — at some point it has to simmer down"
A settlement would unwind the damage to shipping and commodity markets: "Depending on what they agree on, potentially the Strait of Hormuz can be opened, the maritime traffic on the Red Sea can go back to normal, pressure on energy markets and a variety of other commodities around the world that have been battered because of the closure of the Persian Gulf could go back to normal"
A deal would end the war without ending the conflict. "But that does not mean Iran and the United States are on a path to peace"
The reason is that the war settled none of its causes. "So at some level this may not be a forever war, but it is a conflict that could ignite again, maybe a year from now, two years from now, because right now this war hasn't solved any of the reasons for which it started." Iran's nuclear program, its confrontation with Israel and Washington's own disputes with Tehran are all still open. The one change is that Iran's leadership has been killed, which he said leaves "anger and vengeance"
He added two more standing grievances: "The United States has been humbled in this war and is not going to take that lightly," and Israel "still sees Iran as a mortal enemy"
6. A Harsher Tehran
Asked how the war has changed Iran itself, Nasr described a leadership that is both younger and less predictable than the one the United States and Israel set out to remove.
The deaths of military leaders between the June 2025 Israeli war and the war that began in February have amounted to "essentially a generational change within the Revolutionary Guards," and there is now a new supreme leader
The new generation holds a different view of national security than its elders, and the war is personal to it. "When your father is killed, your commander is killed, you yourself could be killed at any moment, you live in bunkers," he said. "So the war for this leadership in Iran is not far away on a battlefront — it's very much in their own living room, in their own lives"
The doctrine has changed from measured retaliation to disproportion and surprise. "It used to be that it would not attack unless first attacked — its theory vis-à-vis the US was that it would retaliate, and retaliate in a measured way in order to control escalation." The new leadership says it will retaliate "in a disproportionate and unpredictable way," and openly claims a benefit in preemptive action
He relayed one commander's phrasing of the shift: Iran no longer operates on an eye-for-an-eye basis but wants "a whole neck and a head for an eye"
The internal lesson drawn in Tehran, on his account, is that past softness invited the attacks, and that the answer is to be "far more aggressive and reckless"
His summary of the change: "So it's the same Islamic Republic, except it's younger and more aggressive, and it's learned lessons from the war — it's become much more hardened and battle-seasoned going through these two wars"
7. A Nationalist Awakening
The host asked whether Iranians see the war as an attack on the government or on the country. Nasr said the answer changed as the targeting widened.
The pre-war theory, held by parts of the opposition and promoted from abroad, was a clean decapitation. The United States and Israel would remove the leadership "in a nice, clean operation" that would not touch the country, clearing the way for Iranians to take their country back. His response: "But wars don't work that way"
In the February war the leadership was targeted — the supreme leader, Revolutionary Guard commanders — but so were hospitals, schools, universities, infrastructure, power stations and oil depots
That scale is what changed the meaning of the war inside Iran. "And the scale of the attack made this no longer about the regime but about the country"
The result was a nationalist turn that complicates the politics, because many Iranians who fought the government found that the soldiers now defending it are the Revolutionary Guards. "So they have much more mixed or complicated feelings," he said. "Nothing is straightforward anymore, it's not black and white"
The government came out of it stronger at home, not weaker. "And generally this has benefited the regime, because until now, not only is it not facing an uprising among the people, it's actually witnessing the population become hardened in its anger at the United States and Israel, hardened around the idea of defense of the homeland." His benchmark is the months just before the fighting: "So the Islamic Republic feels itself to be stronger vis-à-vis its own population than it was before the war started, when we witnessed a massive uprising in Iran in January of 2026 demanding regime change"
8. No One To Take Over
The host said he had always thought the flaw in the American view was the assumption that if the government fell, someone else would step in — and asked whether any faction existed that could have taken the country.
Nasr's answer was no, at least not from outside the system. There was talk of the Shah's son, Reza, but "I think that scenario was only feasible if American tanks arrived the way they did in Kabul or in Baghdad in 2001 to 2003"
The missing ingredient was organization, not anger. However angry Iranians were, he said, no force in the country had "the organization, political party, leadership cadres" and the ability to mobilize — and then to govern
He offered China as the comparison: "Iran in many ways is a major revolution, and it's just like thinking about China — can we really think about a force outside of the Communist Party that can remove it and take over China, as much as people may want?"
Trump's actual working model, on Nasr's account, was Venezuela rather than regime change. Remove one or two leaders and let others already inside the system step forward: "So this is not regime change, it's more like regime transformation or regime redirection." The hope was that killing the supreme leader and certain Revolutionary Guard commanders would leave a pragmatic faction to sue for peace
Two things surprised Washington, and both were about resilience. The population did not rise up as the war started, and the state did not break: "You killed the head of state, you killed so many leaders, and somehow the Islamic Republic continued to function and wage war, and then very quickly chose a new supreme leader, and there was no faction that stepped forward to fight for power"
The host drew the contrast with Venezuela himself — a clean mechanism, no destroyed infrastructure, an economy already weakened over 10 to 15 years — and said Iran had gone very differently. Nasr agreed: "So in a way, the outcome of the war was not what President Trump had hoped or planned for — not only how long it's taken, but how little there is to show for these four months"
The best result now available is the position the United States held the day before the war. "Now the biggest win he can have at this moment is to open the Strait of Hormuz, which was open before the war, and take it out of Iran's hands, which was not in Iran's hands when the war started." Put another way: "So the best-case scenario for him is to be able to go back to where the United States was on February 27, 2026, which was just before the war started"
9. The New Middle East
Asked how the war reshapes the region, Nasr gave the longest answer of the interview.
Iran's Arab neighbors — Kuwait, Bahrain, UAE, Qatar, Saudi Arabia — were attacked by Iran during the war, and the closure of the shipping lane hit others harder still: "There are countries whose economies have been devastated because of the closure of the Strait of Hormuz"
The core damage is to the credibility of American protection. For decades "American security was the backbone of Arab security," bought with bases, weapons purchases and political support. "Now, in this war, the United States has proven itself far less capable than it was advertised"
The gap between what was promised and what was delivered is the whole story. Of what the war showed about American capability: "It was unable to defeat Iran, which by everybody's account is a secondary military power — a country under sanctions for 47 years, with no military allies, that nobody sells weapons to." He added: "The US failed to defend itself, its own bases, and the Arab countries it was supposed to defend against Iranian attacks"
Iran is now seen across the Arab world as more dangerous, and the change is permanent: "Iran has drawn blood in the Arab world, and its attacks cannot be undone"
Arab governments are already splitting over who replaces the American guarantee. "The United Arab Emirates is relying to a greater extent on Israel and India to shore up its defenses, whereas Saudi Arabia is looking to Pakistan and Turkey to do that." Whether American bases return is open, and some may not be welcome, since their presence was part of the reason Iran attacked those countries
The trade exposure is uneven. Qatar, Iraq and Kuwait have exports that are, for now, entirely dependent on how the war ends and on the fate of the strait. Saudi Arabia and the UAE can ship energy from the Red Sea or the Arabian Sea, but need "a whole new security architecture" to protect those routes
The Gulf's economic model rested on an assumption the war has removed. "Before, the Gulf operated as a business haven where you could have data centers, AI infrastructure, massive investments in service industries, manufacturing, global trade, tourism, etc. — all as if the Gulf region is not part of the Middle East, as if it's immune to wars and insecurity there. That bubble has been burst now"
What replaces the old order is competition. Iran and Israel are "even more bitter enemies since these wars," with no mechanism to control the rivalry and a United States that is "incapable, even if willing," of separating them, while Turkey and Saudi Arabia pursue interests of their own
10. Who Won The War
The host asked who has come out ahead, and said he had heard Nasr name China. Nasr split the answer between the region and the powers outside it.
Inside the region the winner is Iran, on a relative test. "Iran is the winner, because it's the only one for whom the glass is half full as opposed to half empty." Everyone else, he said, is being strategically downsized: "Israel met the limits of its military capability in Iran, didn't achieve its war aims with Iran"
Survival itself was the victory: "Iran survived, America survived, Israel too, and in that survival, Iran has actually established certain facts — it's been able to damage American-Arab security relationships and trust, and that's a big victory in itself"
Outside the region, the beneficiaries did nothing. "Now, as far as outside powers are concerned, clearly Russia and especially China are winners." They have not had to intervene, and any American setback works for them
Taiwan is the audience that matters most. "Taiwan is looking at America's ability or willingness to defend its bases and its allies against Iran in the region, and that will impact its calculations about what the United States can do vis-à-vis China"
The war exposed a supply problem in the American arsenal, not a quality problem. "And this war, in a peculiar way, has also exposed the Achilles heel of the American military — that it has extremely sophisticated and lethal weaponry, but has it in short supply. It's very expensive, and it cannot reproduce it at scale the way an extensive war would require"
The arithmetic he drew from that: "So if fighting a country like Iran would exhaust your Patriot missiles, your THAAD missiles, your offensive precision missiles, then going after a larger adversary in Europe or Asia, or having to face multiple adversaries in different theaters of war, would clearly put enormous pressure on America's ability to wage war." Iran has also shown other militaries, the Chinese and the Russians included, how to "exhaust American weaponry very quickly"
His bottom line on the balance sheet is that the United States lost. "So I think generally the war is a net strategic loss for the United States. There's no other way to package it — it went into a war that was supposed to be a few days against a second-rate military power, and it's still fighting. It's run out of ammunition"
Washington cannot force a deal on its own terms, "has to haggle," and cannot reassure other countries in the Middle East that it can rebuild a security order they can trust. "And I think it has been a huge dent in America's global standing"
Bonus Insights
Nasr's parting message was about attention rather than analysis. "I think these are difficult times," he said. "I think it's important for us not to lose sight of what's still at stake in this war, and also going forward, the lessons of what happened"
The host offered his own summary of the year before signing off: "it definitely feels like we're in a scarier world than we were at the start of the year"
The host framed the episode as a follow-up, saying their last conversation "really resonated with our audience" and was a deep dive into six months of Middle East conflict
In the same question about a long war, the host noted that "oil is coming back up again" — the only market reference in the conversation
Nasr said he posts his own work and commentary on X, Instagram and LinkedIn
Nasr's bottom line is that a war Washington expected to win in days against a sanctioned, friendless adversary has instead cost it its ammunition stockpile, its role as the guarantor of Gulf security and a measure of its standing with allies watching from Asia — and that the most Trump can now realistically recover is the position the United States held the day before it started.
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