Middle East and North Africa (MENA)

Economic and geopolitical relations between China and Israel have undergone significant changes following the War on Gaza. Chinese regulatory authorities moved to classify certain areas within Israel under what is known as the Red Category, an official administrative designation that identifies these locations as high-risk investment zones. This classification imposes legal restrictions that prevent the injection of new financial investments into these areas.   As a result, a legal environment has emerged in which Chinese companies rely on security warning protocols and personnel safety considerations as a formal justification for controlling capital flows and suspending the implementation of certain financial obligations under previously signed contracts. This development necessitates a careful examination to understand how these risk assessment mechanisms operate and their tangible impact on the economic relationship between the two countries.

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?

Iran has blocked maritime navigation through the Strait of Hormuz since the first week of March, following the attacks it sustained during Operation Epic Fury. This disruption has hindered the movement of nearly 20 million barrels of crude oil per day. It has trapped shipments of liquefied natural gas, accounting for around 20% of global consumption, within the waters of the Arabian Gulf. As a result, international energy markets are experiencing sharp price volatility affecting Brent crude futures and European gas contracts.   At the same time, maritime shipping lines have been compelled to reroute their commercial fleets, forcing them to navigate around the historic Cape of Good Hope route at the southern tip of Africa. This enforced geographic diversion adds approximately 19 days to maritime transit times to and from Asia, generating weekly losses for global supply chains estimated at between $2 billion and $3 billion in additional operating and fuel costs.   This operational disruption directly affects the technological infrastructure of East Asia, where advanced semiconductor fabrication facilities in Taiwan and South Korea require vast, continuous electricity supplies to operate lithography systems around the clock. These critical facilities, which account for approximately 68% of global semiconductor production, rely on imported liquefied natural gas to ensure the stability of their power networks and prevent disruptions.   In parallel, the precision manufacturing processes involved depend on highly specialised raw materials whose primary sources are concentrated in regions currently affected by the crisis. In particular, production lines require ultra-high-purity helium gas, extracted as a by-product from Gulf LNG liquefaction facilities, which represent roughly 35% of global supply, as well as bromine, which Korean factories import at a rate of 97.5% from the Dead Sea coast for chemical etching processes. Accordingly, technology firms are accelerating efforts to assess their exposure to the dual energy and critical chemical input shortages. At the same time, economic stakeholders monitor the crisis's trajectory with heightened caution to safeguard supply chain continuity.   Accordingly, this analysis examines the strategic and operational implications arising from the closure, focusing on three principal dimensions. First, it addresses the disruption of liquefied natural gas supplies and their direct impact on the security of power grids that sustain major Asian semiconductor manufacturing hubs. Second, it examines the sharp interruption in the supply of critical raw materials, particularly specialised gases and petrochemical inputs required for precision manufacturing processes. Finally, it explores the logistical repercussions of the forced rerouting of maritime shipping routes, as well as the strategic measures states are considering to mitigate future geopolitical risks.

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 strategic partnership between the United States (U.S.) and Israel has long demonstrated an exceptional ability to absorb and manage tactical divergences. Yet the developments accompanying the launch of the U.S. operation "Epic Fury," conducted in parallel with Israel’s "Visiting Lion" operation in late February 2026, have placed this alliance under an unprecedented test in the modern Middle East. Although this coordinated campaign initially achieved decisive operational successes, most notably the elimination of Iran’s Supreme Leader and the dismantling of the command structure of the Islamic Revolutionary Guard Corps (IRGC), the image of complete alignment projected by President Donald Trump and Prime Minister Benjamin Netanyahu conceals fundamental divergences in visions and objectives.   A careful reading of the historical trajectory of this relationship, alongside its current political constraints, suggests that a prolonged conflict will expose the sharp divergence in the strategic interests of the two capitals. As the confrontation shifts from rapid strikes to a complex regional war of attrition whose consequences extend beyond Washington and Tel Aviv, these differences are likely to evolve into deep structural fractures. This paper offers a strategic analysis of this emerging dynamic, arguing that the fundamental differences in the capacity to absorb economic repercussions, manage human losses, and navigate rigid electoral timelines will transform muted tactical disagreements into an overt strategic rift that will be increasingly difficult to contain or deny.

The U.S.-Israel-Iran war and Recent events that followed in Gulf countries have provided one of the clearest real-world demonstrations of modern air and missile defence under sustained pressure. Modern air warfare is increasingly defined by the ability of states to withstand large-scale saturation attacks involving drones, cruise missiles, and ballistic missiles. The proliferation of relatively inexpensive unmanned systems and precision-guided weapons has altered the balance between offensive and defensive capabilities, allowing even modest actors to launch high volumes of aerial threats. In this environment, the success of air and missile defence no longer depends solely on technological sophistication but also on defence density, the concentration of defensive systems relative to territory and population. Dense, layered air-defence networks provide multiple interception opportunities and reduce the likelihood that incoming salvos can overwhelm defensive systems. As recent conflicts have demonstrated, resilience against saturation attacks increasingly depends on whether states can deploy sufficient numbers of interceptors, overlapping defensive layers, and integrated detection networks.

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.

The concept of “America First” is not a new one in the realm of US foreign policy. The term was first made popular during World War 2 when the America First Committee was formed by Yale student Robert Douglas Stuart Jr. and US Veteran General Robert E. Wood which advocated for American neutrality and building up strength through the American people, military, and economy. The idea of reducing the US active engagement in conflict to focus on its own interests caught the attention of Donald Trump, who pursued his own version of “America First” with varying results over the course of his two nonconsecutive terms as US President.   President Trump’s application of “America First” has been inconsistent since resuming office in 2025. This past year saw a series of deviations from the concept of “America First” including assisting Israel in the 12-day war with Iran, the capture of Venezuelan President Nicolas Maduro, and threats towards Iran regarding regime change amid protests. These threats became realized when the US and Israel carried out an unprovoked aerial offensive against Iran, which resulted in the deaths of the Ayatollah Ali Khamenei and several Iranian military officials. With the conflict still ongoing and regime change seeming to be the desired outcome, the conclusion can be made that this conflict signals a shift in President Trump’s “America First” policy. This shift will be explored through redefining “America First”, the Israel factor, and domestic support to get involved in a confrontation with Iran during a consequential election year.