The United States has launched new airstrikes across Iran this week as President Donald Trump, losing patience over the protracted negotiations to end the war, has leaned into violence to ratchet up the pressure on the Iranian leadership.

The US secretary of defence, Pete Hegseth, made clear the airstrikes would likely continue if the peace deal continued to stall, saying:

If we need to negotiate with bombs, we’ll negotiate with bombs.

This came after Iran and Israel fired missiles at one another in recent days and Iran shot down a US helicopter.

Up to this point, both the US and the Iranian regime had respected the precarious ceasefire that had halted the war in early April. Both sides seemed to want it to continue. And Trump is still insisting a peace deal is imminent.

Why, then, are both sides firing on each other now, and where does this leave the negotiations? There are a few plausible explanations.

Escalate to deescalate

In conflicts, states often escalate to deescalate. This is when a country ramps up military action with the aim of intimidating the other side into submission.

Both the US and Iran want to show force to pressure the other side into accepting an agreement that meets their own core interests.

However, the two sides remain at an impasse because their most critical interests are at odds with one another.

The US wants Iran to capitulate on its nuclear program and reopen the Strait of Hormuz to commercial traffic, with no constraints. Iran wants its frozen assets released and a lasting ceasefire between Israel and Hezbollah in Lebanon.

Both sides remain far apart on the nuclear issue, with Iran unlikely to fully agree to US demands that it dismantle its nuclear infrastructure and cease uranium enrichment altogether.

Given the stalemate, both sides want to show they are willing to escalate through military action. Yet, neither wants the ceasefire to break completely.

Trump wants to move on from the war and shift the political agenda domestically in an election year. Fewer than one in six Americans think the US is winning the war. The Iranian regime remains standing, but it cannot ignore the mounting economic pressures of a full-scale war for much longer.

The problem is that escalating in hopes of intimidating an adversary into a deal only works if the other side is not pursuing the same tactic at the same time. Otherwise, both sides end up in an escalation trap, each ramping up the severity of attacks and unable to back down.

Accidental escalation

An alternate explanation is that these escalations are the unintended but inevitable consequence of a tense ceasefire that includes a live military blockade in the Strait of Hormuz.

It remains unclear if the Iranian drone that downed the US helicopter this week, precipitating the retaliatory airstrikes, was intentional or an accident.

An existential regional conflict

Making things more complex is the fact this isn’t just a fight between two protagonists – Israel is simultaneously launching military strikes on an Iranian ally, Hezbollah, in Lebanon.

Israel’s military operation deep into southern Lebanon has fundamentally shifted the regional geopolitics. And it may undermine the tenuous ceasefire between the US and Iran, despite Trump’s efforts to maintain regional calm.

What the Trump administration does not seem to have fully grasped is that in the eyes of the Israelis and Iranians, this conflict runs much deeper and has been going on far longer than the current war. For both sides, it is existential. The Islamic regime in Iran has long opposed Israel’s place in the region, and Israel has long viewed a nuclear-armed Iran as the chief threat to its survival.

As such, Iran will not abandon Hezbollah, which it has long funded and armed, and respect a ceasefire with the US, while Israel wages war in Lebanon. The reason: the regime see itself and Hezbollah as one front fighting the same battle.

And on the Israeli side, the October 7 2023 Hamas attacks on Israel fundamentally shifted Prime Minister Benjamin Netanyahu’s approach to the region. Since then, his far-right government has adopted an offensive military strategy of capturing territory in Israel’s neighbours – Syria, Lebanon and Gaza – and establishing security buffer zones. Netanyahu has also vowed to eliminate any threat coming from Iran, Hamas and Hezbollah.

However, the non-state actors of Hamas, Hezbollah, and even the Houthis in Yemen cannot be eliminated with conventional military force. Militant groups like these can blend into civilian populations and reemerge, sometimes months or years later.

So, despite Israel’s significant use of military force and the widescale destruction of Gaza and now southern Lebanon, Israel will not succeed in eliminating Hamas or Hezbollah, and will keep fighting.

Trump’s approach to regional diplomacy has ignored these complexities. Trump leans heavily on bilateral and personal relationships to achieve his objectives. He has shown little interest or patience in addressing the underlying drivers motivating the multiple actors involved in the conflict.

Will the ceasefire hold?

The most important thing to understand here is how Trump views a “ceasefire”. In a news conference this week, he said in the Middle East, a ceasefire means “shooting in a more moderate manner”.

But we do know he doesn’t want to return to a full-scale war, which is why he demanded Israel and Iran stop striking one another earlier this week.

So, we could see more strikes between the three sides as they continue negotiating. And we may see a memorandum of understanding between the US and Iran in the coming days or weeks. However, this would likely be an agreement for both sides to continue talking. It is unlikely it will resolve the core issues.

Nor is Israel likely to withdraw its troops from southern Lebanon or halt its asymmetric war with Hezbollah.

As I’ve argued before, this has the making of a “frozen conflict”, or an unresolved war that continues at a low level, below the threshold of full-scale combat.

If the deeper roots of the conflict are not resolved, a “ceasefire” between the US, Israel and Iran can only ever be temporary.

Jessica Genauer does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

An election year budget is a government’s pitch for reelection. For opposition parties, it’s a chance to make their case for change.

Unfortunately for Finance Minister Nicola Willis, her National Party can’t campaign on two of its three big fiscal policy promises from the previous election: to achieve a surplus, reduce debt and cut spending on bureaucracy.

With surplus forecasts moved out by years and government debt having risen, that only leaves the bureaucracy as a viable target.

Willis took the initiative last week with a pre-budget speech in Auckland where she announced three major goals based on National’s 2023 pledge to “reduce spending on bureaucracy”:

• cut the number of public service agencies through amalgamations
• embed AI into all public entities
• return core public servant numbers to a historic norm of 1% of the population.

That would mean, by July 2029, 8,700 fewer public service employees than in December 2025. Willis claims that wouldn’t affect wider state sector employees such as teachers, nurses, doctors or police.

Speaking to Auckland business owners and managers, her message was clear: Wellington is getting serious about value for taxpayers’ money.

Using figures from the Public Service Commission, Willis pointed out that public servants had, since 1993, been around 1% of the population, but grew to 1.2% under the previous Labour government.

Bureaucrats are always a soft political target for the right, and Willis’ taxpaying business audience was apparently receptive to her message.

She chose a sharp wedge issue, however, forcing Labour and the Greens to react by defending public sector employees and attacking “austerity” policies.

Moreover, the economy has been hit by an unexpected energy crisis because of the Middle East situation.

In December, Westpac was forecasting 3.0% growth in 2026 and a decline in the unemployment rate. By this month, they’d revised that to 1.5% growth and a rise in unemployment, none of which is good for a government’s budget or its electoral prospects.

National’s fiscal challenge

Willis’ pre-budget speech was getting in ahead of any bad news she may deliver on budget day. Before the 2023 election, the National Party had offered voters a fiscal plan to “deliver the turnaround the government’s books need”, pledging to:

• achieve a surplus in 2026/27
• reduce government debt
• reduce spending on bureaucracy.

Willis has refreshed that third goal, but what about the other two?

Rather than return to surplus in 2026/27 as promised, the Treasury’s December 2025 update shifted the goalpost to 2029/30. So National faces November’s election still in deficit, and the war in Iran has only made things worse.

Accordingly, government debt has risen in the past three years. The Treasury forecast net core Crown debt to rise and peak at 46.9% of GDP in 2027/28, then decline to 46.1% by 2030.

If the Superannuation Fund is included, as economist Susan St John recommends, the net debt-to-GDP figures are much lower, but they’ve still risen since 2023.

Officially, the Superannuation Fund is excluded from the calculation of net debt because it’s not available for current expenditure, and is invested in growth assets and hence volatile.

By National’s own standards, though, the government has failed to deliver on some key fiscal policies in its first term. In November, voters will determine whether it’s to be its last.

The government’s opponents can argue National’s goals were wrong to begin with.

The assumption the government is somehow “broke” and has to stop borrowing and cut spending can be challenged. But there is no political consensus about what would be a fiscally prudent “ceiling” above which public debt shouldn’t rise.

The Treasury’s “recommended prudent limit for net core Crown debt” is 50% of GDP. Other countries have gone much higher. But New Zealand is a small, almost irrelevant economy in the eyes of international investors and credit-rating agencies, so cross-country comparisons may not be helpful.

Debt and doubt

In the 1990s and 2000s, both National and Labour governments reduced net core Crown debt, starting from a level higher than at present, down to below 10%. After the global financial crisis hit in 2008, this allowed the next National government to run deficits for a few years while the economy recovered.

Willis says “the interest bill on our debt has soared to about $9 billion a year”, or about 6% of expenses. That’s a long way from being broke or unable to service loans, let alone default.

But there has to be a prudent limit to borrowing, especially for a small economy vulnerable to economic shocks. No government wants to turn their country into one of history’s sovereign debt defaulters. The consequences of that are catastrophic.

Government debt may sound boring, but it’s a vital political question for this budget and for the coming election.

The Green, Labour and NZ First parties are promising public investment funds, and they should advise voters how much they’d need to borrow overall. All taxpayers help repay the debts, after all, so they should be able to weigh borrowing up against the benefits of proposed investments.

Get ready for the usual political bunfight on budget day. But think critically about where the government – and its opponents – might lead the country.

Grant Duncan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

Buying groceries at a big supermarket is a relatively new phenomenon. Prior to the early 1900s you would have done your shop in the small, family-owned, butchers, bakeries or greengrocers that lined our high streets.

Now, online shopping, “dark stores” and AI chatbots are helping with your groceries, and supermarkets are adapting. It might sound exciting, or terrifying, but what we’re most interested in is what happens next. Will we trade choice, autonomy and our health for convenience? And will we even have a say when huge corporate profits are at stake?

➡️ Click here to read the full interactive story

Gary Mortimer has received past funding from the Building Employer Confidence and Inclusion in Disability Grant, the AusIndustry Entrepreneurs' Program, the National Clothing Textiles Stewardship Scheme, the National Retail Association and the Australian Retailers Association. He is an independent director and board chair of Services and Creative Skills Australia, a federally-funded jobs and skills council.

Paul J. Maginn does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.