Iran’s Foreign Ministry has announced that the Memorandum of Understanding (MoU) between Iran and the United States is “completely dead,” attributing its collapse to continued American military strikes. The ministry has also issued a warning that countries supporting these US actions could be considered legitimate military targets. This development follows US strikes on Iranian targets in response to Iranian assaults on commercial vessels in the Strait of Hormuz, escalating tensions and impacting global oil supply routes.

The MoU, initially signed on June 17, 2026, aimed to cease hostilities between the US, Iran, and their allies. However, the agreement’s expiration on July 8, 2026, and subsequent military actions have led to what Iran describes as a definitive breach. The statement by Iran’s Foreign Ministry further emphasizes the derailment of diplomatic efforts, highlighting the role of the US in scuttling negotiations in Muscat aimed at managing the strategic Strait of Hormuz.

Market participants appear to view this development as significantly increasing the likelihood of Iran formally withdrawing from the MoU negotiations. This has been reflected in the market pricing, suggesting a shift towards a higher probability of a formal withdrawal announcement by the end of July.

Key Takeaways

• The announcement from Iran’s Foreign Ministry appears to suggest the complete breakdown of the US-Iran MoU, impacting diplomatic relations.
• Market pricing indicates an increased likelihood of Iran withdrawing from the MoU negotiations by July 31, with a notable rise in expected probabilities.
• The warning against countries supporting US strikes could indicate a potential escalation in regional military activities.

What to Watch

Observers will closely monitor any official statements from key Iranian figures, such as Abbas Araghchi, regarding the withdrawal from negotiations. Developments in US-Iran relations, including potential new military actions or diplomatic efforts, could further influence the situation. The response of allied countries, particularly those mentioned as potential targets, will also be critical in assessing the likelihood of escalation in the region. Additionally, any changes in the status of commercial transit through the Strait of Hormuz could impact global oil markets and associated regional tensions.

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