The bill has come due
The external backdrop was complicated by two important developments that affected short-term interest rates and, more importantly, long-term rates.
First, the continuation of the conflict in the Persian Gulf, far more persistent than expected. Although it is in the economic interest of both sides to end hostilities, political motivations are definitely more powerful.
On the one hand, the Iranian regime is fighting for its survival and understood that the key to this, at least over the next few years, lies in its ability to control flows through the Strait of Hormuz, even at the cost of losses associated with its oil exports, as well as inflation.
From the U.S. perspective, in turn, a retreat in the conflict, understood as ceding control of the Strait to Iran (particularly if it also involves charging some fee for the passage of vessels), would be perceived as equivalent to a military defeat and a worse status quo than the one that existed before the confrontation. There are, therefore, irreconcilable differences from a political standpoint that have made it difficult, if not impossible, to reach a solution that would bring economic relief to both sides.
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