An Economic War of Attrition

Here’s what’s on tap for the day: The U.S. and Iran pivot to economic warfare amid a tense cease-fire, Europe provides a new lifeline to Ukraine, and Anthropic’s Claude Mythos AI model sparks new cybersecurity concerns.

The U.S.-Iran cease-fire is on shaky ground, and there are currently no concrete plans for another round of peace talks. The war has not resumed on a broad scale—and U.S. President Donald Trump extended the cease-fire on Tuesday—but it’s debatable whether the current situation qualifies as a truce.

Washington and Tehran are now locked in an economic war of attrition, with both sides attempting to squeeze the other into making concessions by taking aim at one another’s pocketbooks via a naval standoff. The United States is continuing its blockade of Iranian ports, which Tehran says is a cease-fire violation, and has seized multiple Iran-linked vessels—including a cargo ship in the Arabian Sea and two oil tankers in the Indian Ocean—in recent days. Though reports indicate that some ships are getting through, the blockade aims to inflict enough economic pain on Iran that it agrees to Trump’s demands on issues like its nuclear program.

Meanwhile, Iran still has a chokehold on the Strait of Hormuz, which has become the most pressing issue in the war for Trump. The closure of the strait has caused a global energy crisis and seen gas prices skyrocket. Trump on Thursday claimed that the United States has “total control” over the strait, but there’s little evidence of this. And the fact that Trump announced the same day that he had ordered the U.S. Navy “to shoot and kill” any vessel placing mines in the waterway doesn’t bolster his case.

Deadlocked. It’s an open question whether this escalating economic game of chicken will compel either side to back down. Iran has weathered crippling U.S. sanctions for years. It’s no stranger to heavy-handed economic pressure from Washington, and it now has major leverage thanks to its Hormuz chokehold.

The blockade is also a double-edged sword for Trump. While it might create more financial discomfort for Tehran by cutting off profits from oil sales, it simultaneously threatens to unravel the cease-fire and exacerbate the ongoing energy crisis (which the head of the International Energy Agency has described as the worst in history).

Good Trump, bad Trump. Though Trump has been doing a bit of a “good cop, bad cop” routine by repeatedly making bellicose threats before backing down at the eleventh hour—and it’s evident that he wants to find an off-ramp—it’s also apparent that he doesn’t want to end the war on unfavorable terms for the United States.

While there’s no denying that the war has caused pain at the pump for Americans, the United States (the globe’s top producer of crude oil) is far more insulated from the direct economic consequences of the conflict than the wider world, as FP editor in chief Ravi Agrawal has written. This gives Trump some wiggle room—but not much, given the mounting political pressure he’s already facing over the war.

Reluctant to reignite the war or put U.S. boots on the ground to achieve unfulfilled objectives, Trump’s options are to make concessions or hope that Iran blinks first. But the longer the impasse continues, the more likely it is that one or the other will take escalatory steps to break the deadlock. If that happens, the truce may fall apart altogether. (Read John’s piece here on the most pressing questions we’ll face should the cease-fire collapse.)

The Hegsodus continues: U.S. Defense Secretary Pete Hegseth’s escalating purge of senior Pentagon leadership claimed another victim on Wednesday, when Secretary of the Navy John Phelan was removed from his role even as the Navy is implementing a blockade on Iranian ports in the Strait of Hormuz. Phelan repeatedly clashed with Hegseth in recent months, CNN reported, with Hegseth unhappy about the pace of the military’s shipbuilding program and Phelan’s direct communication with Trump.

Trump told reporters on Thursday that although Phelan is “a very good man” and he “really liked him,” Phelan was fired because he “had some conflict with not necessarily Pete [Hegseth] but some other—he was a hard charger, and he had some conflicts with some other people, mostly as to building and buying new ships.” Phelan will be replaced by Undersecretary of the Navy Hung Cao, a Trump ally who ran for Senate in 2024, when our FP colleague Allison Meakem says he told her: “I am about killing a commie every day and twice on Sunday.”

Hegseth, meanwhile, announced on Tuesday that he was ending the Defense Department’s mandate for service members to receive the influenza vaccine.

In other personnel news, we can’t recommend enough the deep dive that our FP colleagues Sam Skove and Rachel Oswald published this week on the U.S. State Department’s controversial new recruitment drive.

What should be high on your radar, if it isn’t already.

Ukraine gets a lifeline. The European Union on Thursday approved a $106 billion loan to support Ukraine that had been held up for months by Hungarian Prime Minister Viktor Orban. However, he finally dropped his veto after losing a national election this month, and after Ukraine reopened its section of the Druzhba pipeline on Wednesday. The loan emphasizes defense spending and will allow Ukraine to purchase key weapons it requires to sustain its war against Russia, against whom the EU also adopted a new sanctions package on Wednesday.

“Deadlock over,” EU High Representative for Foreign Affairs and Security Policy Kaja Kallas wrote in a post on X, adding that the loan and sanctions would “provide Ukraine what it needs to hold its ground, until [Russian President Vladimir] Putin understands his war leads nowhere.”

Managing Mythos. Leading artificial intelligence company Anthropic shocked the cybersecurity world this month when it said its new language model, Claude Mythos Preview, was too good at jailbreaking computer systems to be released to the public. This week has seen some more troubling revelations about the model: A small group of unauthorized users from a private online forum gained access to Mythos on the same day that Anthropic announced its release to a limited set of companies, according to Bloomberg. Meanwhile, Axios reported that the U.S. Cybersecurity and Infrastructure Security Agency—the country’s main cyberdefense agency—does not have access to the model, even as other parts of the government such as the National Security Agency do.

But just how big of a threat is Mythos, and what does it mean for U.S. national security? Rishi spoke to multiple former government officials and cybersecurity experts to try to figure that out—read more here.

An elections employee tapes a poster with instructions to voters ahead of the upcoming municipal elections in Deir el-Balah in the central Gaza Strip on April 21, four days before voters go to the polls in the first such election since the start of the war with Israel in October 2023.Eyad Baba/AFP via Getty Images