Iran

One of the most structurally fragile economies in the Middle East serves as the backdrop to Iran’s current military confrontation. Extensive international sanctions have, for more than a decade, restricted Iran’s access to global financial markets, constrained its energy exports, and limited foreign investment. Gradually, the Iranian economy came to evolve as a sanctions-adaptation economy, surviving persistent external pressure through informal trade networks, shadow energy exports, and alternative financial channels instead of collapsing outright.   Yet unlike sanctions, which create gradual economic constraints, war introduces a fundamentally different kind of shock by disrupting logistics networks, causing unprecedented damage to national infrastructure and compelling the state to reallocate its resources toward defense spending amid military escalation. Such shocks, for an already fragile economy operating at the limits of macroeconomic stability, can generate disproportionate consequences. The current conflict therefore brings into focus a central economic question: can Iran’s sanctions-adapted economy withstand the pressures of war, or will military escalation reveal structural weaknesses previously concealed by the sanction’s system?

The global political and economic landscape is undergoing structural shifts following the outbreak of US and Israeli military operations against Iran in late February 2026. In response to this escalation, the Iranian leadership adopted a strategic decision to close the Strait of Hormuz to commercial shipping and oil tankers, leveraging its asymmetric capabilities, including naval mines, advanced missile systems, and drones, to transform the strait into an active military theatre.   The Strait of Hormuz constitutes a critical artery for global energy supplies, with approximately 20 million barrels of oil transiting through it daily, accounting for around 20% of global consumption, as well as shipments of liquefied natural gas (LNG). The closure has produced immediate economic repercussions, including the suspension of maritime traffic, the withdrawal of insurance coverage by shipping insurers, and a sharp surge in oil prices, which have exceeded $120 per barrel. In an effort to contain the crisis, the European Union’s High Representative for Foreign Affairs and Security Policy, Kaja Kallas, proposed a diplomatic initiative to establish a secure maritime corridor in the Strait of Hormuz under United Nations supervision to ensure the safe flow of energy supplies.   Kallas’s initiative draws on the “Black Sea Initiative” model, which enabled the export of Ukrainian grain under international guarantees. European efforts are driven by concerns that disruptions to gas supplies could undermine global food production, given their direct linkage to fertiliser manufacturing. The initiative, therefore, seeks to insulate energy vessels from military targeting to preserve global economic stability. Against this backdrop, the central question arises: to what extent can this initiative help de-escalate the current crisis, and what alternatives remain should the Black Sea model prove unviable?

The United States and Israel launched Operation Epic Fury in late February 2026, targeting Iran’s nuclear and missile infrastructure and seeking to remove its political leadership. Although the operation achieved its initial tactical objectives with high precision, it provoked an asymmetric retaliatory response from the remaining Iranian forces. This response took the form of a comprehensive blockade of the Strait of Hormuz, the world’s most critical maritime artery for energy transport, triggering a severe global economic shock. Such disruption could propel the international system towards reducing its reliance on fossil fuels and accelerating the adoption of alternative domestic energy solutions, most notably nuclear power.   At the same time, global electricity demand is rising sharply, driven by the rapid expansion of advanced artificial intelligence infrastructure and high-performance computing facilities. This sudden disruption of fuel supplies places policymakers in major industrial economies under immediate economic and security pressures, while simultaneously exposing the profound consequences of closing the Strait. In this context, the present analysis examines the repercussions of the Strait of Hormuz's closure on global supply chains. It then develops a historical comparison with the oil price shocks of the 1970s, illustrating how those crises redirected states towards nuclear technology. The study concludes by analysing emerging regulatory and financial measures, as well as new geopolitical alignments, that are accelerating the global drive to construct nuclear reactors in 2026.

While global attention remains focused on the situation in the Strait of Hormuz, through which nearly twenty million barrels of crude oil pass each day, less attention is given to the potentially more significant developments occurring within Iran’s borders. As of March 2026, the military strikes carried out by the United States and Israel generated what can be described as a caloric chokepoint effect, which cannot be offset by any level of kinetic military capabilities. According to the Islamic Republic of Iran, the country’s principal vulnerability in the 21st century lies in its deep-water grain elevators, rather that its military power.   While Iran’s food supply system is logistically fragile and assumes that the country’s southern ports will always remain accessible and fully operational, however, the withdrawal of war-risk insurance and the stalling of shipping through Bandar Abbas have invalidated this assumption. Therefore, describing the current situation merely as a trade disruption is inaccurate, as it effectively represents a biological countdown. As operational feed stocks decline to a fourteen-day supply, the resulting protein shortage poses a significant risk of domestic instability—an effect that conventional military strikes are unlikely to match.

The United States and Israel's joint military campaign against Iran is upending the strategic order of the Middle East in ways that extend far beyond Tehran. The strikes have killed Iran's Supreme Leader Ali Khamenei, targeted Iran's military and nuclear infrastructure, and triggered retaliatory Iranian attacks across the region. As the war enters its second week, a second and potentially more consequential shift is taking shape. With Iran's role as the dominant pole of regional opposition to Israel now in question, a new rivalry is hardening between Israel and Turkey, one that carries different stakes, different risks, and a far more unpredictable trajectory than the confrontation the current war was designed to resolve. Understanding this emerging fault line requires examining both the structural forces pushing the two states apart and the domestic political dynamics that risk turning competitive rhetoric into irreversible confrontation.

The United States entered the second week of its joint military campaign against Iran on March 7, 2026, having launched Operation Epic Fury alongside Israel on February 28. Within days, the conflict had killed Supreme Leader Ali Khamenei, triggered Iranian retaliatory strikes across the Gulf, and drawn in regional powers from Bahrain to Lebanon. For the Republican Party, the war arrived at what was already an exceptionally precarious moment — one in which the historical forces of midterm politics, falling presidential approval, and a restless voter coalition had already conspired against them. The onset of a major, unpopular war has only deepened those vulnerabilities, and the question facing the GOP heading into November is no longer simply whether they will lose seats, but how many.

The U.S.-Israel and Iran War has affected the interests of many countries. In the last few days, China emerged as a significant player in these events. Beijing called for an immediate halt to the attacks by both sides and the protection of vessels passing through the Strait of Hormuz, culminating with the Chinese Foreign Minister Wang Yi pledging to send a special envoy to the Middle East for mediation.   Beijing has interconnected interests in the Middle East that are significantly affected by the war and will most likely reshape its strategic opportunities in the region, particularly in terms of energy security, trade routes, and diplomatic relations with key regional players. Beijing’s pragmatic foreign policy approach toward the region relies on protecting its economic interests and maintaining a strategic balance. So, the war could provide an opportunity for China to navigate new opportunities in the region and, consequently, expand its influence, particularly by strengthening ties with other oil-producing nations and increasing its investments in reconstruction efforts.   Likewise, China’s strategic partnership with Iran mainly revolves around oil supply and large-scale investments. The consequences of the war raise questions about the future of this relationship and the possibility that China may reshape its foreign policy toward Tehran if it faces a potential decline in Iran’s ability to sustain such interests as a result of the strain on its power after the war.

On Feb. 28, 2026, the United States and Israel launched a military campaign against Iran, striking more than 900 targets in the first 12 hours and killing Iran’s Supreme Leader Ayatollah Ali Khamenei. The conflict is still raging, with strikes continuing across the country and the region destabilising by the day. Yet behind the missiles and fighter jets lies another revolution in how this war is being fought.   AI, the same technology that millions use daily to draft emails or summarise documents, has become a central instrument of lethal military power. Anthropic’s Claude AI model is embedded inside the Pentagon’s targeting and intelligence apparatus, processing satellite imagery, intercepted communications, and operational data to help commanders decide who to strike, where, and when.   What once required days of human analysis is now compressed into hours or minutes, enabling a pace of warfare that no prior generation of military planners could have executed. AI has been present on battlefields before, from drone guidance systems to satellite image analysis, but the Iran conflict represents its most expansive and consequential deployment to date, and the full implications of that scale are still unfolding.

The Feb. 28, 2026 United States–Israeli offensive against Iran represents the most consequential escalation in Gulf security dynamics in over a decade and introduces immediate, medium-term, and long-term risks to global energy stability. The strikes targeting senior leadership and strategic military infrastructure triggered Iranian retaliation across the Gulf region and sharply increased the probability of disruption to maritime energy flows, particularly through the Strait of Hormuz.   While physical supply outages remain limited at the time of writing, markets have responded by repricing geopolitical risk. Crude benchmarks surged on reopening, freight and insurance costs rose materially, and volatility spiked across commodities and currency markets. The core economic question is not whether prices react, they already have, but whether the conflict transitions from a risk-premium shock to a sustained supply disruption.   The Strait of Hormuz remains the central transmission channel. Roughly one-fifth of globally traded oil and more than one-third of seaborne liquefied natural gas pass through this chokepoint. Even temporary interference has outsized macroeconomic implications. Assessing the implications of the crisis requires examining immediate market reactions, potential disruption scenarios, medium-term supply responses, and the longer-term structural consequences for global energy security and macroeconomic stability.

The fundamental character of modern aerospace warfare has undergone an irreversible paradigm shift, transitioning abruptly from the deployment of exquisite, highly survivable platforms to the brutal arithmetic of industrial attrition and affordable mass. This operational reality was starkly illuminated in late February 2026, with the commencement of Operation Epic Fury by the United States Armed Forces and the parallel Operation Roaring Lion executed by the Israel Defence Forces.   Following the collapse of nuclear negotiations, the allied coalition launched a massive preemptive military campaign. Deploying an overwhelming concentration of aerospace assets, the coalition struck over one thousand strategic targets deep within Iranian territory during the opening twenty-four hours. United States forces executed over nine hundred individual precision strikes in the first twelve hours alone, utilising stealth bombers, naval fighters, and cruise missiles, escalating to more than one thousand, two hundred, and fifty targeted strikes within forty-eight hours. Simultaneously, the Israeli Air Force conducted over seven hundred sorties on the first day, dropping more than one thousand two hundred munitions to achieve immediate tactical successes and air superiority.   However, the immediate and sustained retaliation by the Islamic Revolutionary Guard Corps, designated Operation True Promise IV, has placed an unprecedented and mathematically gruelling strain on the allied integrated air and missile defence architecture. Within the first forty-eight hours of the conflict, the adversary entente launched roughly four hundred and twenty medium-range ballistic missiles targeting many countries in the region. This barrage was accompanied by massive swarms of loitering munitions. The staggering depletion rates of multimillion-dollar interceptors and precision strike munitions against high-volume, low-cost adversary threats have exposed a profound mathematical vulnerability in contemporary military logistics. As the global defence industrial base proves incapable of replenishing these exquisite arsenals at the speed of combat consumption, both the allied coalition and the adversary entente are confronting a rapidly approaching logistical exhaustion horizon. To continue the war and secure a decisive strategic victory, it is an absolute strategic imperative for both sides to aggressively substitute these high-end, legacy assets with scalable, cost-asymmetric alternatives, pivoting their operational doctrines toward deployable mass and continuous attritional endurance.

The first quarter of 2026 marked a strategic turning point in the deployment of hard power and the management of geopolitical interaction. For decades, computing technologies remained largely confined to operational support roles, such as processing intelligence data or guiding precision munitions. January and February, however, witnessed a structural shift as military planning moved away from human-dependent decision cycles toward managing autonomous algorithmic kill chains. This transformation was formally articulated in the “Artificial Intelligence Acceleration Strategy” issued by the United States Department of War (DoW) on Jan. 9 2026. The directive aims to entrench American military dominance by rapidly integrating AI across warfighting, intelligence, and enterprise operations, while transforming the defence apparatus into what officials describe as an “AI-first” military structure.   This doctrine rested on strict operational parameters prioritising overwhelming lethality, rapid execution, and objective-driven systems that place mission success above all other considerations, deliberately excluding social and political variables from algorithmic decision cycles to ensure decisive superiority in battlefield decision-making. This shift was reflected in two unprecedented operations: the capture of Venezuelan President Nicolás Maduro during Operation Absolute Resolve in January 2026, and the decapitation strike targeting Iran’s Supreme Leader Ayatollah Ali Khamenei during Operation Silent Holy City, conducted within Operation Epic Fury in February 2026.   These operations reflected the integration of large language models, dynamic data architectures, tactical assessment algorithms, and autonomous unmanned systems, fundamentally transforming the speed, precision, and geopolitical cost calculus of neutralising high-value targets. Together, they signal that AI has moved beyond a supporting analytical role to become a strategic architect of the battlespace and a driver of kinetic execution.

In remarks on 2 March 2026, U.S. President Donald Trump did not rule out the possibility of sending American ground troops into Iran if it became necessary. However, he didn’t acknowledge that such a move would carry serious risks given Iran’s size and military capability. Any U.S. ground invasion would likely involve significant casualties and could fail to achieve its goals.  Trump has generally shown reluctance to engage in large-scale ground wars. While he has authorized military actions, including airstrikes, against Iran and other states in recent months, his preference historically has been for limited use of force, such as air power and specialized units, rather than deploying tens of thousands of troops.   Part of this approach stems from his broader view that prolonged, chaotic conflicts are unpredictable and often produce uncertain outcomes. Major ground combat operations can create widespread instability and make strategic consequences hard to forecast. Throughout both his first term and the early part of his second term, Trump has shown no strong inclination to commit large numbers of U.S. ground forces abroad.   Trump and Bibi (also known as Israeli Prime Minister Benjamin Netanyahu) recognize that forcing a full regime change in Tehran would be one of the toughest strategic tasks imaginable. Iran’s political and military structure is robust and not solely driven by personalist rule; it is anchored in a religiously grounded system that has endured since 1979. With the challenges of a successful ground invasion in mind, their current strategy relies on a combination of military pressure and other techniques intended to weaken the regime over time, though there is no guarantee this will bring about its collapse.