Larry Johnson: What Triggered Trump to Make the Deal with Iran?

by Larry Johnson [6-18-2026] Larry C. Johnson(bio).

To quote James Carville, “Its the economy stupid!” On Monday I wrote:

So the question we ought to ask is why did Donald Trump blink and accept the proposal that Iran proffered way back in April?

I think there are several reasons, but the principal one is that the US is running out of oil, which means Trump will not be able to artificially suppress the price of gasoline. US strategic oil reserves have fallen to their lowest level since 1983, reports CNN. The decline comes amid continued drawdowns to mitigate the impact of the conflict with Iran. Reserves have dropped to 340.3 million barrels, last seen during the Reagan administration, which was still building the stockpile. US daily consumption is 20 to 21 million barrels in 2026, which means the reserve can supply 17 days of gasoline, which falls on July 1st.

Today, my dear friend Pepe Escobar, reported that Donald Trump was briefed over the weekend — perhaps by Secretary of Energy Chris Wright — that the rapidly draining Strategic Petroleum Reserve would be exhausted within weeks. Who knew that Donald Trump would confirm this during his press conference announcing the deal with Iran? Trump told reporters today that oil reserves would have run out in four weeks if the Strait of Hormuz had not been reopened. His exact words were:

We run out of reserves at about four weeks. You know, there are reserves all over the world, and we would really run out, and there’ll be a time when you wouldn’t be able to get it.

There you have it… Trump and his key economic and energy advisors realize that the US economy could go off the cliff before the end of summer, which would certainly eliminate any chance that the Republicans would retain control of the Senate and the House.

If you have not read the MOU, here it is:

Full text of the Islamabad Memorandum of Understanding between the Islamic Republic of Iran and the United States of America

The Islamic Republic of Iran and the United States of America, jointly and in good faith, agreed on the following on June 18, 2026:

1. The Islamic Republic of Iran, the United States of America, and their allies in the current war, by signing this memorandum of understanding, declare an immediate and permanent cessation of military operations on all fronts, including Lebanon, and commit not to initiate any war or military operation against each other henceforth, to refrain from threats or use of force against each other, and to guarantee the territorial integrity and sovereignty of Lebanon. The final agreement will confirm the permanent end of the war on all fronts, including Lebanon, and the other provisions of this clause.

2. The Islamic Republic of Iran and the United States of America commit to respect each other’s sovereignty and territorial integrity and to refrain from interfering in each other’s internal affairs.

3. The Islamic Republic of Iran and the United States of America commit to conduct negotiations and reach a final agreement within a maximum of 60 days, extendable by mutual consent.

4. Immediately upon signing this memorandum of understanding, the United States of America will begin lifting its naval blockade and any harassment or obstruction against the Islamic Republic of Iran, and will completely end the naval blockade within 30 days. During this period, ship traffic will be proportional to the pre-war traffic volume as established by the Islamic Republic of Iran. The United States of America also commits to withdraw its military forces from the peripheral area of the Islamic Republic of Iran within 30 days after the final agreement.

5. Upon signing this memorandum of understanding, the Islamic Republic of Iran will make arrangements with its utmost effort for the safe passage of commercial ships, free of charge for only 60 days, from the Persian Gulf to the Sea of Oman and vice versa. Commercial ship traffic will commence immediately and will be established within 30 days considering the necessity of removing technical and military obstacles and mine clearance by the Islamic Republic of Iran. The Islamic Republic of Iran will negotiate with the Sultanate of Oman to determine the future administration and maritime services in the Strait of Hormuz, in accordance with applicable international law and the sovereign rights of the coastal countries of the Strait of Hormuz, and will also consult with other Persian Gulf coastal countries.

6. The United States of America commits, together with its regional partners, to create a definitive program agreed upon by both parties for the reconstruction and economic development of the Islamic Republic of Iran, providing at least 300 billion dollars. The implementation mechanism of this program will be finalized as part of the final agreement within 60 days. All necessary approvals, waivers, and licenses for the related financial transactions will be provided by the United States of America.

7. The United States of America commits to end all types of sanctions against the Islamic Republic of Iran, including United Nations Security Council resolutions, International Atomic Energy Agency Board of Governors resolutions, and all unilateral U.S. sanctions, both primary and secondary, according to a timetable agreed upon as part of the final agreement. The Islamic Republic of Iran and the United States of America acknowledge the fundamental importance of the issue of sanction removal mentioned above and express their intention to address these matters promptly in negotiations to reach a mutual agreement on them.

8. The Islamic Republic of Iran reaffirms that it will not produce or acquire nuclear weapons. The Islamic Republic of Iran and the United States of America have agreed that the status of stored enriched materials will be resolved through a mechanism agreed upon by both parties and according to the timetable set forth in clause 7, at least by dilution on site, under the supervision of the International Atomic Energy Agency. Both parties also agree to discuss the issue of enrichment and other mutually agreed topics related to the nuclear needs of the Islamic Republic of Iran based on a satisfactory framework to be agreed upon in the final agreement. The final agreement will confirm the provisions of this clause. The Islamic Republic of Iran and the United States of America acknowledge the fundamental importance of the nuclear issues mentioned above and express their intention to address these matters promptly in negotiations to reach a mutual agreement on them.

9. The Islamic Republic of Iran and the United States of America agree to maintain the status quo until a final agreement is reached; the Islamic Republic of Iran will maintain the status quo in its nuclear program, and the United States of America will not impose any new sanctions against Iran nor deploy additional military forces in the region.

10. The United States of America commits to immediately issuing waivers from the Treasury Department for the export of Iranian crude oil, petrochemical products and their derivatives, and all related services including banking transactions, insurance, transportation, etc., upon signing this memorandum of understanding and until the sanctions are lifted.

11. The United States of America commits to fully making available the limited or blocked funds and assets of the Islamic Republic of Iran for use upon implementation of this memorandum of understanding. The United States of America and the Islamic Republic of Iran will mutually agree on the procedure for releasing these funds during the negotiations. These funds, whether held in the main account or transferred, must be fully usable for payment to any ultimate beneficiary designated by the Central Bank of the Islamic Republic of Iran. The United States of America commits to issuing all necessary approvals and licenses in this regard.

12. The Islamic Republic of Iran and the United States of America agree to establish an executive mechanism to monitor the successful implementation of this memorandum of understanding and future adherence to the final agreement.

13. After signing this memorandum of understanding and subject to the commencement of implementation of clauses 1, 4, 5, 10, and 11 of this memorandum and the continuation of these actions, the Islamic Republic of Iran and the United States of America will exclusively begin negotiations on the remaining clauses of the final agreement.

14. The final agreement will be endorsed by a binding resolution of the United Nations Security Council.

Trump still has a problem… Opening the Strait of Hormuz will not mean immediate relief for the shortage in the global oil market. The reopening of the Strait of Hormuz is a necessary but far from sufficient condition for global oil supply to normalize. Several compounding factors will delay meaningful relief to world markets, likely for weeks to months.

The Anchored Tanker Problem — A Backlog, Not a Surge

The intuitive assumption is that dozens of fully loaded tankers sitting at anchor in the Persian Gulf represent a coiled spring — once the strait opens, they all rush to market simultaneously, flooding supply. The reality is more complicated and, in key respects, the opposite.

Many of those tankers have been sitting with crude aboard for up to four months. That oil is not in good condition. Crude oil in storage aboard a VLCC in the Persian Gulf’s extreme heat undergoes thermal degradation, sedimentation, and in some grades, partial polymerization of heavier fractions. More practically, the cargo specifications that a refinery contracted for may no longer be met after months of heat exposure and water separation issues in the tanks. Before those cargoes can be delivered, they will need to be tested, and some will need blending or reprocessing before any refinery will accept them.

Beyond cargo quality, the ships themselves have been idle for four months. Engines need to be brought back online carefully. Hull fouling — the accumulation of marine growth on the hull during idle periods — significantly reduces speed and fuel efficiency, meaning transit times will be longer than normal. Some vessels will require port inspections before they can legally sail under their flag state rules.

Finally, even if every anchored tanker departed tomorrow, the receiving terminals and refineries on the other end are not standing by with empty tanks ready to accept a simultaneous flood of deliveries. Port scheduling, berth availability, and refinery run rates all have to be coordinated. A surge of arrivals would create congestion at discharge ports that would paradoxically slow the effective rate at which oil enters the refinery system.

The Transit Time Problem — The Pipeline Has to Refill

Even under normal circumstances, oil doesn’t appear on world markets the moment a tanker is loaded. A VLCC sailing from Kharg Island in Iran or Ras Tanura in Saudi Arabia to Rotterdam takes roughly 20 to 25 days via the Cape of Good Hope route — which many ships were forced to use during the closure — or about 18 to 20 days through Suez even after Hormuz reopens. Delivery to Asian customers in China, Japan, or South Korea from Gulf loading ports runs 15 to 20 days through the strait under normal conditions.

This means that the crude being loaded today — assuming loading could begin immediately — won’t appear as refined product available to consumers for five to seven weeks at minimum, once you account for transit, discharge, refinery processing time, and distribution. The world is not going to feel this at the pump in days or even the first couple of weeks.

More importantly, the production side has to normalize too. Fields that were producing at reduced rates or were shut in during the conflict don’t simply snap back to full output instantly. Reservoir pressure management, wellhead and pipeline inspections, and restart protocols for offshore platforms all take time. Saudi Aramco, for instance, has operational procedures for bringing shut-in capacity back online that are measured in weeks, not hours.

The Mine Problem — The Most Underappreciated Factor

This may be the single biggest constraint on rapid resumption of normal traffic, and it is receiving far less attention than it deserves.

The MOU text requires Iran to use “best efforts” to reopen the strait and to begin demining, but demining is not a quick process. The Persian Gulf and the approaches to the strait contain some of the most commercially sensitive and geographically constrained shipping lanes in the world. Iran has had four months to lay mines across chokepoints that are, at their narrowest, about 21 nautical miles wide, with only two navigable channels of roughly two miles each.

Marine mine clearance — even with modern equipment and in cooperative conditions — is painstaking work. A minesweeper cannot simply drag a channel and declare it clear. Each suspected mine must be located, classified, and either detonated in place or rendered safe by divers or ROVs. In contested or uncertain conditions, the pace is even slower. There is no international consensus yet on who will conduct clearance operations, who will certify lanes as safe, and what standard of clearance will be accepted before commercial traffic is deemed acceptable. If the US takes on the task, it could be a lengthy process. In late April, the Washington Post reported that the Pentagon told Congress it could take six months to fully clear the Strait of Hormuz of mines deployed by the Iranian military.

This directly feeds into the insurance problem. The Lloyd’s of London market and its Joint War Committee designate geographic areas as war risk zones, which triggers additional premium loadings on hull and cargo coverage for any vessel transiting those waters. The Persian Gulf and Hormuz are almost certainly now designated at the highest war risk tier. Even with the MOU signed, underwriters will not quickly remove that designation. They will wait for credible evidence of mine clearance, a sustained period of incident-free transits, and independent verification — not a diplomatic document.

The practical consequence is that until insurance markets normalize, many shipping companies will simply refuse to send their most valuable assets — a VLCC loaded with two million barrels of crude is worth well over $200 million between the ship and cargo — through waters that their insurers either won’t cover or will cover only at premiums that make the voyage economically irrational. War risk premiums during periods of active conflict can run to multiples of normal rates. Those rates don’t fall to normal levels on the day a ceasefire is announced. They fall gradually, as actuarial evidence accumulates that the risk has actually diminished.

The Net Picture

The opening of the strait is a precondition for oil market normalization, not normalization itself. The realistic sequence is: a cautious initial resumption of traffic by the most risk-tolerant operators, followed by gradual mine clearance certification of specific channels, followed by a slow return of mainstream commercial shipping as insurers progressively reduce war risk premiums, followed — weeks later — by the actual arrival of that oil at refineries and its conversion into usable product.

A reasonable estimate for when world markets might begin to see materially increased supply as a result of today’s agreement is six to ten weeks at the earliest, and that assumes no incidents, no mine strikes, no political reversals, and a cooperative Iranian demining effort. Any one of those things going wrong resets the clock.

While Trump’s decision to finalize the MOU with Iran is a positive step (and I was wrong in my assessment that this would not happen) the road to economic recovery and stabilization of world markets is still months away.

One final note of irony… Trump electronically signed the MOU in the Hall of Mirrors at the Palace of Versailles, which was where the primary peace settlement ending World War I was signed between the Allied powers and Germany. I don’t think Trump had an Allied victory in mind as he signed the document.