The US is escalating military pressure on Iran instead of pulling back, even after the war appears to have cost the party seats in the midterm elections — a bad sign for peace and for markets already rattled by the fighting.

US forces reportedly struck Iran's Kashm Island, and Iran is now threatening to cut undersea internet cables running through the Strait of Hormuz. Iran also says it has scrapped its old 2,000km missile range limit, meaning dozens more countries could now be hit in retaliation. Shipping through the Strait has dropped sharply after a string of tanker attacks, despite claims from Trump that the waterway is fully open.

Centcom has launched a new task force expanding its blockade of Iran toward its land borders and the Caspian Sea, cutting off billions in oil exports. Critics argue this makes a negotiated peace less likely, not more. Separately, reports say a strike on Iran's deeply buried nuclear facility is being discussed inside the Pentagon, raising fears that the next two months could be the most dangerous stretch of the war.

Inside the White House, chief of staff Susie Wiles — previously a Netanyahu campaign adviser — has been pushed out and replaced by Stephen Miller, seen as a sign the administration is doubling down rather than seeking an exit. Meanwhile Saudi Arabia is facing fresh Houthi missile attacks on its airport and oil infrastructure, raising the risk of a wider regional spillover. Economists and voters are tying the war to rising gas prices, a stalled housing market, and inflation, which many say drove the recent election losses.

Outlook: With military pressure increasing rather than easing, the risk of a wider war involving Iran and Saudi Arabia remains high over the next couple of months.