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Donald Trump's strategy to defeat Iran is facing more roadblocks as the US weapons stockpile and cash to fund the military operation runs dry.

Further complicating the path to peace, Tehran is refusing to reopen the Strait of Hormuz until Washington pays war reparations, lifts sanctions, and ends its naval blockade.

Meanwhile, War Secretary Pete Hegseth has failed to sell skeptical senators on Trump's record $1.5 trillion defense budget. The chamber left town for its five-week summer recess without advancing it, or the separate war funding the Pentagon says it urgently needs.

It comes as the Pentagon presses defense contractors to resupply munitions and other critical stockpiles depleted by Trump's war with Iran.

The President suggested over the weekend that he will shift away from military strikes and focus on applying economic pressure.

'We are low-keying it. We are only semi-negotiating with them,' he told Axios on Sunday. 'We are just watching Iran with its huge inflation and the fact they have no money.'

Trump's comments came a day after details emerged on the potential deal between Iran and Oman on managing the Strait of Hormuz.

The Oman agreement, which was viewed as a pending done deal until Tehran issued a list of demands on Saturday, would have given Iran partial control of traffic in the strait.

Iran's demands amount to a message that the regime does not plan to submit to Trump in the near future. Tehran wants US forces out of the region and a compensation check for the damage, terms Washington has consistently ruled out.

Donald Trump's strategy to defeat Iran is facing fresh humiliation, with Tehran refusing to reopen the Strait of Hormuz until Washington pays war reparations, lifts sanctions and ends its naval blockade

Pete Hegseth has failed to sell skeptical senators on Trump's record $1.5 trillion defense budget

Shortages of long-range guided missiles and air defense interceptors are among the reasons Trump has held back from launching further large-scale strikes against Iran in recent days

The President over the weekend suggested that he will be shifting away from military strikes and focusing on applying economic pressure on Iran

Nearly every condition Tehran listed on Saturday already appears in the memorandum of understanding Trump signed on June 17, an agreement that collapsed when American strikes resumed and the blockade was reimposed on July 14.

Since the start of the Iran blockade, US Central Command has reported it has turned away 53 commercial vessels, while shipping data shows no tankers have loaded at Kharg Island.

That pressure has yet to translate into concessions, even as Iranian inflation hit an annual 88.6 percent in late June and the government asks citizens to ration electricity.

At home, Deputy War Secretary Steve Feinberg gave arms manufacturers 21 days to come back with plans for 'significantly faster' deliveries or expanded production lines, according to a memo first reported by the Washington Post.

Military experts believe Patriot interceptor stocks have fallen at least 65 percent from pre-war levels, with THAAD inventories down by more than a third.

Trump has publicly rejected the shortage reporting, insisting on Truth Social last week that American stockpiles remain enormous and that production is running at full tilt.

Hegseth, for his part, told Republicans last month that refusing to fund the department at $1.5 trillion represents the single greatest danger facing the country.

His warning failed to move GOP lawmakers who are now openly splintering with the White House over a war entering its sixth month with 17 American troops dead.

Trump confronted Hegseth at Camp David late last month and demanded to know why he had been kept in the dark about how far the missile stocks had fallen

Trump has publicly rejected the shortage reporting, insisting on Truth Social last week that American stockpiles remain enormous and that production is running at full tilt

The funding fight has also exposed a rift inside the administration over American supplies for the war.

Trump confronted Hegseth at Camp David late last month and demanded to know why he had been kept in the dark about how far the missile stocks had fallen, according to the Washington Post.

However, Trump publicly closed ranks days later, calling the coverage treasonous, threatening prison for the leakers and declaring himself extremely happy with his war secretary.

Israeli Prime Minister Benjamin Netanyahu, meanwhile, has rejected Trump's 15-point plan for the next phase in Gaza on Sunday by saying that the IDF will not pull back until Hamas has genuinely disarmed.

The refusal leaves Trump in the unusual position of being publicly defied by his closest ally.

Hamas leadership is demanding that Trump pressure Netanyahu to move forward with the peace plan.