ROI- Middle East to pay for Trump's midterm rout: Bousso

The Iran war was a key driver of the Republican Party's shellacking in the US midterms on Tuesday, but the bruising defeat may make ​it more challenging for President Donald Trump to end the conflict. Whether he opts for a new round of strikes, a quick deal with Iran or simply ​maintains the status quo, the president’s weakened position means the Middle East quagmire is likely to deepen. A sustainable ‌solution for ​the region and global energy markets now looks even further away.

Democrats seized control of both the Senate and House of Representatives in Tuesday's vote, scoring sweeping victories in several Republican strongholds for the first time in decades as voters delivered a stinging rebuke to Trump and his eight-month-old war in Iran. In the run-up to the vote, Trump sent conflicting messages about his next steps in the Middle East conflict. He refused to rule out a resumption of combat operations while also suggesting he was optimistic that a deal would be ‌struck with Tehran to resolve a conflict that has severely disrupted oil and gas production in the world's most important energy hub, sending global fuel prices soaring.

The Democratic sweep ushers in a new period of divided government in Washington. Once the new Congress is seated next January, Trump will likely struggle to push through legislation and is apt to veto anything Congress sends his way. He may seek to operate via executive order, as he has throughout much of the past two years, but such actions are vulnerable to Supreme Court challenges. When it comes to foreign policy, however, Trump will continue to hold significant power. Although Congress could restrict funding for military operations in Iran, and technically should have declared war, the president retains broad authority to conduct military operations, ‌especially once they are underway.

The hostile political landscape in Washington is therefore unlikely to force the president’s hand. Trump may ultimately pursue the option most likely to lower energy prices, but don't expect that to deliver lasting peace. STALEMATE

The Iran war, launched by Israel and the US on February 28, initially had multiple aims, including destroying Tehran's military capabilities and ‌preventing it from developing a nuclear weapon, with government change also encouraged. But since June the conflict has largely morphed into a battle over control of the Strait of Hormuz, the narrow waterway that previously transported a fifth of the world's oil and liquefied natural gas.

While energy flows collapsed to near zero in the first months of the war, crude oil shipments through the strait have recovered to around 80% of pre-war levels in recent months, thanks to US Navy-assisted tanker convoys. But oil prices remain around 40% above pre-war levels, reflecting the elevated risk of transporting oil out of the region. At the same time, the US has imposed an effective blockade on Iran's oil exports, squeezing the country's vital source of revenue.

Both Washington and Tehran therefore had reasons to seek a diplomatic resolution before the midterms, and the Republican thrashing seemingly gave the administration more incentive. Yet the result has mostly highlighted ⁠how bad all of ​the president's options are. NO WAY OUT?

The US administration seemingly has three options: further strikes, a quick deal ⁠or the status quo. On Monday, the second option appeared possible. In recent weeks, Qatar has been mediating indirect talks between Washington and Tehran. News that Iran’s Supreme Leader Ayatollah Mojtaba Khamenei had given the negotiators more leeway to make a deal helped send Brent crude prices tumbling more than 14% since Monday. Yet Iran later squelched this optimism, saying the sides remain far apart.

At the heart of the negotiations are Iran's nuclear ambitions. Trump has ⁠consistently held that Tehran must never obtain a nuclear bomb, though he has sent mixed signals over whether he would accept a civilian nuclear programme. Iranian officials in recent weeks have argued that any talks about its nuclear ambitions should be held at a later stage and that negotiations should initially focus on reopening the Strait of Hormuz, releasing Iranian funds held overseas and easing sanctions on Tehran.

Now that Trump ​has been weakened politically, Tehran will have little reason to quickly agree to a deal that is not in its favour. Yet if he signs a deal that fails to meaningfully restrict Iran's nuclear programme, Trump would essentially be admitting defeat, something he may be especially loath to do. While an agreement that fully ⁠reopens Hormuz could lower oil prices in the short term, a quick deal that doesn't resolve or even address the core issues would leave the Middle East in a precarious position in which Iran would likely hold significantly more power than it did before the war began. This risks further undermining US relations with its Gulf allies and laying the foundations for a new confrontation.

Trump's option of further strikes is underpinned by a significant US military buildup in the ⁠Middle ​East. Two aircraft carrier strike groups are already in or near the region, with a third heading toward the Gulf, according to US media reports. Together, they would constitute one of the largest US military deployments to the region in decades. Deploying so much military muscle is not cheap, so this appears to indicate Trump's intentions.

Yet the administration faces a familiar problem. A limited military campaign likely has little chance of fundamentally weakening Iran's rulers, while a broader campaign risks dragging the US deeper into a deeply unpopular war. The electorate's strong opposition to the conflict makes a brief campaign far more likely than a major operation, but it risks resulting in more casualties, more damage to energy infrastructure and little change in either ⁠side's negotiating positions.

SHAKY STATUS QUO Finally, Trump could opt to maintain the status quo, hoping that the US blockade on Iran will eventually lead to the collapse of the government, or at least force it to concede ground in peace talks.

That may happen eventually, but time isn't on Trump's side. As we enter the final two years of the ⁠Trump era, the president will likely be keen to ensure his legacy is not defined by ⁠a military quagmire. The problem for him is that there is no obvious off-ramp. The biggest loser is the Middle East. Whether it faces a new round of military strikes, a flimsy peace deal that emboldens Iran or a tense status quo, the region and global energy markets are likely to enter a highly unstable era. Tuesday's vote may have weakened Trump's desire to remain in the Middle East, but it did not bring the region any closer to peace.

(The opinions expressed here are those of Ron Bousso, a columnist for Reuters.) Enjoying ‌this column? Check out Reuters Open Interest (ROI), your essential new ‌source for global financial commentary. Follow ROI on LinkedIn, and X.

And listen to the Morning Bid daily podcast on Apple, Spotify, or the Reuters app. Subscribe to hear Reuters journalists discuss the ​biggest news in markets and finance seven days a week. (Ron Bousso; Editing by Marguerita Choy)