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(CNN) —  

Iran’s downing of a US drone takes the bitter foes one step higher in a cycle of escalation that could soon overwhelm each side’s reassurances that they have no desire to tumble into war.

The showdown with Iran has now become the grave foreign policy crisis for President Donald Trump that many analysts have long predicted and into which the administration is entering without any obvious end game in mind.

Trump responded to the downing in an ominous fashion on Thursday morning by tweeting “Iran made a very big mistake!” But in an appearance in the Oval Office a few hours later he appeared to suggest that the order to down the drone came from a rogue element of the Iranian military.

“I find it hard to believe it was intentional,” Trump said, seemingly looking for a way out of direct confrontation with Iran.

The situation is a huge test for an erratic and unpredictable President and the hawkish strategy of advisers who may be leading him into a dangerous dead end he is desperate to avoid.

Already, it is making Trump’s protests that everything is just fine look out of date and superficial – at a time when his 2020 campaign’s claims to have restored leadership in the world are being outpaced by events.

“Don’t worry about a thing, everything’s under control, don’t worry about a thing,” Trump told Fox’s Sean Hannity on Wednesday.

The events of recent weeks, including attacks on several energy tankers in the Gulf of Oman – which Iran has been blamed for and denied – and Tehran’s warning that it will break internationally agreed limits on uranium production – have heightened attention on a regime that has long been seen as a threat to US and Western interests. Tehran is accused of destabilizing its neighbors, supporting terrorism and abusing human rights.

But US allies see rising tensions as the logical result of Trump’s decision to pull out of the Iran nuclear deal, a move that was wildly popular with his base but threatened inevitable strategic reverberations that are now beginning to unfold. The administration is now for instance demanding that Iran honor a nuclear deal which it abandoned.

The turbulence in the Gulf and in Washington leaves Trump wrestling with how to respond to an Iranian assault on US prestige without setting off a chain of events that could escalate into a full-scale war between the US and Iran and the Islamic Republic’s proxy forces in the region.

“What worries me is that the President’s decision space gets further limited and smaller,” said John Kirby, a retired navy admiral and CNN military and diplomatic analyst.

“Some of it is of his own doing and the fact that his own team is not on the same page but also now the Iranians are closing that decision space and they are pushing him into a corner and I don’t think that is good for anybody,” Kirby said.

Relentless pressure on Iran through economic sanctions and other means is being cranked up by two long-term enemies of the Islamic Republic — Secretary of State Mike Pompeo and Trump’s national security adviser John Bolton.

There is a strong suspicion among many analysts that the pair, and other outspoken Iran hawks like Republican Sens Tom Cotton of Arkansas and Lindsey Graham of South Carolina, are trying to maneuver Trump into a position where a military confrontation becomes inevitable without an Iranian capitulation that seems highly unlikely.

Graham told Fox News Wednesday that Trump had “had it” with Iran. Cotton said on CBS’s “Face the Nation” over the weekend that the tanker attacks – already merited “retaliatory military strikes.”

A manageable crisis could spin out of control

While the current standoff is alarming, it is currently playing out within manageable parameters. The risk is that with every inflammatory step, available off-ramps disappear.

The shooting down of the drone — Iran claims over its territory while the US says it was over international waters — is a dangerous uptick but will not in itself cause war.

Tehran does have the capacity to cross the line into a serious conflict — with thousands of US troops in the region in range of its proxies and militia allies and the world economy hostage to the flow of oil in the Gulf.

If Iran were to move on those fronts, a military confrontation that could quickly spill out of control would become inevitable. But there are still hopes that cool leadership on both sides of the conflict could avoid a disastrous war that would hammer the global economy, cause huge loss of life in the region and again expose America’s inability to shape events in the Middle East to the liking of hawkish foreign policy experts in Washington.

After more than a year of fierce US economic pressure that has battered its economy, Iran is not caving, as some US officials hoped. Instead, it’s using its points of leverage to make the US pay a price for its policy, to divide the allies, to probe at fractures in the administration and to put Trump on the spot.

But Trump has signaled he has no desire to get dragged into another war in the Middle East — a core political principle — especially with his reelection campaign cranking up.

Earlier this week, the President described attacks on two tankers in the Gulf of Oman — a possible warning by Tehran of the chaos it can bring to oil supplies and the global economy — as “very minor” in an interview with Time magazine.

But now, the President must work out how to respond to the drone attack, to halt Iran’s escalatory gamble while not making the situation worse and making a new gambit by Tehran inevitable.

In recent weeks, Washington has dispatched an aircraft carrier group to the vicinity of the Gulf and said it will send a moderate detachment of 1,000 more troops to the region.

Were Iran to try to impede the flow of oil through the Strait of Hormuz, the administration could be forced into a major naval operation to protect tankers and guarantee free navigation.

But the effort would require a massive financial and military commitment that would be complicated by the skepticism of US allies over the White House’s Iran policy.

US Iran policy exposed

Trump has banked on Iran’s clerical leaders being forced back to the negotiating table by relentless economic pressure. But such a view appears to discount 40 years of lessons about the antagonistic Iran-US relationship following the 1979 revolution.

Trump’s view – that international relations can be conducted with the former tactics of a real estate magnate – is being seriously exposed. None of North Korea, Iran and China have reacted to massive US economic pressure by abandoning what they see as their core national interests.

Iran’s Supreme Leader Ayatollah Ali Khamenei said last week he would never sign off on talks with Trump, and there is no reason to doubt his word.

The White House’s withdrawal from the Iran nuclear deal appears to have been read by Iran’s leaders that Washington can never again be trusted to stick by the terms of a deal.

Diplomats from international powers who joined the deal say that recent events are the logical payoff from a Trump foreign policy that is geared to domestic political wins and wiping out the legacy of President Barack Obama — for whom the Iran agreement was a centerpiece.

Former Vice President Joe Biden – the leading Democratic presidential candidate – quickly inserted himself in the growing Washington debate over the downing of the US drone.

“President Trump’s Iran strategy is a self-inflicted disaster,” Biden said in a statement.

“By walking away from diplomacy, Trump has made military conflict more likely. Another war in the Middle East is the last thing we need.”

The administration argued that the Iran deal – which froze Iranian enrichment of uranium that could be used to make a nuclear bomb – was flawed because it did not take into account Iran’s nefarious behavior in its region – including missile tests and support for extremist groups like Hezbollah.

But the deal did at least put on hold the kind of crisis that Trump is now facing.