The cease-fire in the Middle East began to unravel the moment it was announced.

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Described as a pause, it increasingly looks like something more fragile: a temporary interruption in a conflict whose underlying dynamics remain unresolved. Yet much of the public discussion in the United States still rests on a familiar assumption - that sufficient military and economic pressure will eventually force Iran to back down, the latest being the blockade of Iran’s ports. That assumption may prove dangerously misplaced.

At the centre of the American strategy is a clear and publicly stated objective: the Strait of Hormuz must remain open. When a political leader frames an outcome as essential, the cost of failing to achieve it rises sharply. The issue ceases to be purely strategic. It becomes a question of credibility.

For Trump, this war is no longer simply about Iran. It is about demonstrating that the United States can still impose outcomes on the rest of the world when its core interests are challenged.

In that sense, the United States does not just seek success. It increasingly requires it. Iran, however, is operating under a very different logic. For Tehran, this is not a war that must be won in any conventional sense. It is a war that must be endured. This difference between these two very different empires goes to the heart of why this conflict is so difficult to resolve.

Over the course of my career in finance, I have learned that the outcome of any negotiation depends less on raw leverage than on a clear understanding of the other side’s constraints. The most successful agreements are not those in which one side overwhelms the other, but those in which each side secures what it cannot afford to lose. When that understanding is absent, even strong positions can fail.

I learned this the hard way in my negotiations with Citigroup over EMI. At the time, I believed I held a strong legal and financial position. But I failed to recognise how dramatically Citigroup’s internal constraints had changed in the wake of the financial crisis. Its leadership could not be seen as conceding, regardless of the case's underlying merits. What appeared to be leverage that I could use to get a positive outcome turned out to be irrelevant. The same lesson applies here.

The American approach to Iran reflects a belief that sufficient pressure - military, economic, and political - will force the other side to yield. That assumption is grounded in experience with more conventional states. Iran is not one of them.

The Islamic Republic is a system shaped by revolution and sustained by resilience.

Pressure is absorbed, dispersed, and managed. Pressure is not an exception for Iran. It is the norm. For much of its existence since 1979, the country has lived under sanctions, isolation, and external threat. It has had to build a functioning state under conditions that would strain most governments.

In many cases, the tools intended to weaken Iran have instead helped shape its capacity to endure.

On one side, the US is under pressure to achieve a visible and decisive outcome. Iran is under pressure simply to remain intact. In such circumstances, time can favour the side that needs less. Resolution still feels a very long way off.

But a negotiated settlement remains possible. However, it is unlikely to take the form of a clear victory for either side. More plausibly, it will involve a set of arrangements in which both parties can claim success. The United States may point to constraints placed on Iran’s capabilities. Iran may point to the survival of its system and the preservation of its strategic position.

If the conflict continues to be framed in terms of winning and losing, the space for compromise narrows. Each side becomes more invested in its public position, and the cost of backing down increases. For the global economy, that means prolonged uncertainty and increased disruption.

Each day, Trump’s rhetoric becomes yet more aggressive. He displays more visible anger, which is not helpful for a world leader. And that anger won't help him make a deal. Indeed, it will hinder it. The United States is approaching this conflict as something that must be won. Iran is approaching it as something that must be survived. Until the US fully understands that difference, the war will continue.

Guy Hands is the Founder of private equity firm Terra Firma.

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