Iran's strategy is to leverage the US midterm elections to its advantage. By maintaining pressure and keeping gas prices high, Iran can weaken President Trump politically, aiming to make him a "lame duck" president. This turns the US domestic political calendar into a key battleground, forcing Trump to negotiate from a position of weakness.

The latest US sanctions campaign against Iran was presented as a major offensive but lacked significant new actions, such as sanctions on major Chinese banks. This suggests the US is pivoting from military options to economic threats that it may be hesitant to fully enforce, risking that the Iranian regime perceives it as weakness.

Contrary to being a sign of irrational aggression, Iran's military actions and proxy attacks are a calculated response. As US economic sanctions prove effective, Iran's only remaining incentive is to escalate militarily in other regions to exert pressure and counter the blockade.

Investors should not over-react to congressional turbulence. Many of the most market-relevant policies—on trade, regulation, industrial strategy, and AI—are executed via executive authority, not congressional action. This means their trajectory is unlikely to be altered by events like a shutdown or shifting political dynamics in Congress.

The public threats of a military strike against Iran may be a high-stakes negotiating tactic, consistent with Trump's style of creating chaos before seeking a deal. The goal is likely not war, which would be politically damaging, but to force Iran into economic concessions or a new agreement on US terms.

The current US strategy against Iran is not a prelude to a ground war but an 'Anaconda strategy.' It combines targeted kinetic strikes with severe direct and secondary economic sanctions to slowly suffocate the regime. The goal is to foment internal collapse over several months, avoiding a costly and politically untenable invasion.

With no viable military or diplomatic solution, the conflict is on a path to endless escalation. The most probable end comes from domestic politics: if the opposition party wins control of Congress in the midterm elections, they can use their constitutional power of the purse to cut funding for the war.

Iran's leadership is betting it can withstand economic pressure longer than the US president can tolerate rising gas prices and diplomatic fallout ahead of midterm elections. Having survived past sanctions, Iran believes its autocratic regime has more staying power than an American administration facing voter discontent.

A president can legally initiate military actions like a blockade without congressional approval by first designating the target regime as a 'Foreign Terrorist Organization.' This provides a separate legal playbook and set of executive powers, circumventing the formal declaration of war process.