Gulf allies avert US Strike on Iran as Washington weighs temporary sanctions relief

Following interventions by regional leaders, a planned US military strike against Iran was postponed amid reports Washington may temporarily waive oil sanctions during negotiations.

WHAT: A US military strike was postponed while diplomats negotiate temporary waivers for oil sanctions.

WHY: Gulf powers successfully lobbied Washington to prevent an escalation that could shatter energy markets.

WHAT NEXT: The fragile ceasefire faces its biggest test yet if short-term negotiations fail to deliver.

Global energy markets narrowly avoided a severe supply shock this week after US President Donald Trump confirmed the postponement of a planned military strike against Iran. This tactical pause, initiated following urgent consultations with regional allies, coincides with emerging backchannel communications suggesting a potential easing of economic hostilities. A source close to the Iranian negotiating team informed the Iranian News Agency that Washington’s latest proposal includes a provision to waive oil sanctions during an active negotiation period.

This volatile pivot from kinetic military action to potential sanctions relief underscores the Persian Gulf's position as a critical node of systemic vulnerability. The immediate outlook remains a complex balancing act between securing an administrative resolution and managing the persistent risk of renewed hostilities following the temporary ceasefire that began on April 8.

Diplomatic framework

The decision to delay direct military action was driven by coordinated pressure from allied states concerned about widespread infrastructure damage and market destabilisation.

In a social media post on May 18, Trump said that leaders from Saudi Arabia, Qatar, and the UAE requested that the US “hold off” on the planned offensive while negotiations continued, explicitly aiming to stabilise regional energy markets. Following these comments, international oil prices pared earlier gains, as market participants interpreted the postponement as evidence of a preference in Washington to avoid broader regional escalation.

Beneath the suspended military stand-off, diplomatic channels are actively attempting to forge a viable framework for de-escalation. The temporary suspension of Office of Foreign Assets Control (OFAC) restrictions proposed by the US would provide a specific, risk-free window for talks. However, a fundamental structural disagreement persists: Tehran maintains that the permanent removal of all economic sanctions must be an explicit, baseline component of US commitments. Conversely, Washington’s offer remains limited to a temporary waiver until a final, formal understanding is reached.

Additional multilateral discussions have taken place to manage broader market impacts. Trump noted last week that he discussed Iranian sanctions and Chinese purchases of Iranian crude during meetings with Chinese President Xi Jinping in Beijing. Nevertheless, negotiations face significant hurdles. According to reports cited by Axios, the White House recently rejected a proposal delivered via Pakistani mediators on the grounds that it lacked sufficient commitments regarding Iran’s enriched uranium stockpile and future enrichment activities.

In a separate move highlighting persistent supply concerns, US Treasury Secretary Scott Bessent extended a sanctions waiver allowing temporary sales of Russian oil to certain countries, explicitly citing the need to mitigate global supply disruptions.

Maritime blockades

While diplomatic discussions regarding potential sanctions relief proceed, direct physical constraints continue to severely affect Iranian export volumes. Since April 13, the US Navy has maintained a strict naval blockade in the Sea of Oman and the Indian Ocean. The said strategic objective of this operation is to intercept Iran-linked vessels to pressure Tehran into a comprehensive settlement, while simultaneously preventing exports to fill Iran's domestic storage infrastructure to absolute capacity.

The operational impact of this maritime blockade has been formally acknowledged by Iranian officials. On May 18, Iranian President Masoud Pezeshkian confirmed that the country had “run into problems” maintaining its petroleum exports, marking the first such admission by a senior official since the blockade began.

“They blocked the route and we are not exporting oil. We cannot export oil easily,” Pezeshkian said in remarks carried by the ISNA news agency.

The president explicitly criticised domestic commentary suggesting that the energy sector remained unaffected, adding: “These claims that we have not encountered problems are just talk.”

Data from maritime intelligence firms confirms a notable reduction in export logistics. While tracking companies such as TankerTrackers.com report that Iranian crude exports continue, they are operating at substantially lower volumes. Consequently, Iran has been forced to store excess crude in onshore tanks and offshore supertankers.

On May 18, Bloomberg reported that 23 tankers had been detected around Kharg Island, Iran's primary oil export terminal. The publication identified this as “the largest cluster” of vessels at the facility since the blockade began, noting that the carriers were positioned at regional anchorages or berthed at crude and LPG loading jetties. Commenting on the financial impact of the naval operation from Air Force One last week, Trump claimed that Iran had conducted “no business” over the preceding two and a half weeks, resulting in an estimated revenue loss of “$500mn a day”.

Asymmetric risks

Despite the postponed US offensive, the threat of direct military strikes against energy infrastructure remains a significant risk factor. Reports from The New York Times and Israeli media outlets indicate that US and Israeli military planners are conducting detailed preparations for a potential resumption of hostilities, with options including a targeted assault on the Kharg Island terminal.

Because Kharg Island processes around 90% of Iran's crude shipments, any operational disruption there would severely impair the country's export capacity and lead to upward pressure on global crude benchmarks. In response to these reports, Deputy Speaker Hamidreza Haji-Babaei issued a formal warning on state television on May 18.

“If any damage is inflicted on Iranian oil, Iran will act in a way that the US and the world will not be able to receive oil from the region for a considerable period,” Haji-Babaei said.

The Deputy Speaker emphasised that neighbouring states are keenly aware of the regional risks, noting that “if even a firecracker goes off in the region, Iran will be forced to turn it into a regional war.” He further warned that Iran would retaliate against any infrastructure attacks by targeting the energy assets of regional countries, whether they were “a friend, claiming friendship, or claiming hostility,” explicitly referencing UAE President Mohamed bin Zayed al-Nahyan.

This unstable security environment is further demonstrated by recent physical incidents. The UAE reported a drone strike near the Barakah nuclear power plant. Although authorities confirmed that additional drones were intercepted and that there was no radiological impact, the event underscores the persistent risk to critical infrastructure. Similarly, Saudi Arabian forces reported the interception of unauthorised drones entering its airspace from Iraq, confirming that security risks remain distributed across the wider Gulf region.

Strategic implications

The primary logistical chokepoint for the global energy market remains the Strait of Hormuz, through which approximately 20% of global oil and LNG flows pass. During the initial 39-day conflict, Iranian forces effectively closed the waterway, restricting passage to a limited number of approved vessels. Since the Iranian Revolutionary Guards assumed operational control of the strait in early March, daily commercial vessel traffic has collapsed.

Haji-Babaei described the waterway as a primary “strategic tool” for Tehran, saying it was “more important to us than an atomic bomb.” He indicated that Iran's operational control over transit through the strait serves as the main deterrent against further US military action, stating: “It is impossible for Trump to have the ability to do something and not do it. Anyone who thinks otherwise is naive.”

Furthermore, Tehran is seeking to formalise its influence over the waterway through institutional and legislative measures. The Iranian parliament is currently drafting a bill to impose mandatory transit fees on commercial vessels navigating the strait. Haji-Babaei also warned that if external nations comply with US-led sanctions, the Islamic Republic would respond proportionally and “sanction that country in the Strait of Hormuz”.