[The Strait of Hormuz: a narrow corridor through which nearly a fifth of the world’s oil flows — and where global stability can constrict just as quickly.]
Editor’s Note: The war unfolding between the United States, Israel and Iran is no longer a contained regional confrontation. It has begun to reshape energy flows, security architectures and geopolitical alignments across the Middle East — with consequences that extend far beyond the battlefield.
In this two-part analysis, Vivek Y Kelkar examines first the structural dynamics of the conflict: the fragility of Gulf security arrangements, the risks to global oil and LNG supplies, the limits of regime-change assumptions, and the calculations of Washington, Moscow and Beijing. In tomorrow’s edition, he turns to India — and the difficult strategic choices this war presents for its energy security, trade agreements with Gulf states, diaspora safety and remittance flows.
Across the Middle East the night sky flickers with air-defence fire, drones and missiles. In Riyadh, smoke rose briefly near the diplomatic quarter after drones struck close to the American embassy; Saudi Arabia’s Ras Tanura refinery also came under Iranian drone attack. At Ras Laffan in Qatar, the vast complex anchoring liquefied natural gas exports fell silent after precision strikes halted production. In Tehran, explosions were reported near military and internal-security sites as American and Israeli aircraft pressed their campaign. The war in Iran is now conclusively regional — and globally consequential.
The consequences are ricocheting across energy terminals, shipping lanes, commodity and capital markets. Refugee routes from Iran and beyond are stirring again. Traffic through the Strait of Hormuz has slowed sharply; oil and gas prices have surged. The theatre stretches from western Iran to southern Lebanon, from Iraqi militia strongholds to the eastern Mediterranean.
Global wars increasingly exhibit system-defining traits. They do not conclude cleanly; they harden into protracted ambiguity. The Iran–Gulf war fits that pattern. There is escalation — but no discernible political, military or economic endgame. What began as an effort to degrade Iran’s nuclear and missile capabilities now carries economic and strategic ramifications across the global order and American power.
Conflicts no longer conclude; they harden into protracted ambiguity.
Energy and Economic Shock
Energy markets amplify the risk. Iran’s threat to shipping in Hormuz is tangible. Even partial interdiction — or insurance withdrawal — can constrict flows. Roughly a fifth of global oil consumption transits that chokepoint, alongside substantial LNG volumes. Iran cannot defeat America conventionally, but it can impose economic pain on the region and the globe. Higher oil and gas prices feed directly into inflation, fiscal balances and domestic political pressures across importing economies.
For Gulf states, the immediacy is visceral. Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Iraq and Bahrain have reported missiles or drones entering or striking their territory. Joint statements denounce violations of sovereignty. Behind them lies strategic recalibration.
For decades Gulf security rested on a triangular balance: American protection, managed rivalry with Iran and rapid economic diversification. That triangle has fractured. When projectiles land near oil terminals, airports and diplomatic compounds, controlled competition collapses. These states are no longer peripheral observers of a US–Iran confrontation; they are reluctant front-line participants.
The economic impact is immediate. Qatar’s suspension of LNG production at Ras Laffan — underpinning roughly a fifth of global LNG trade — constitutes a supply shock of unusual scale. Israel has shut parts of its offshore gas output. Saudi Arabia has paused key refinery operations as a precaution. Insurance premiums for tankers transiting Hormuz have jumped. Brent crude has climbed; gas markets have reacted even more sharply.
For Gulf economies built on reliability of supply, this is not merely a security crisis but a credibility test. Saudi Arabia’s Vision 2030, the UAE’s ambitions as a logistics and financial hub, Qatar’s post-World Cup investment drive — all depend on being seen as stable nodes in a volatile region. Sustained disruption threatens that claim.
Gulf leaders recognise their asymmetry. A direct assault on Iranian territory by their limited militaries would invite retaliation against densely populated urban and industrial centres. Their current calculus is calibrated deterrence: avoid overt war with Tehran while absorbing strikes. It is a delicate balance when ballistic missiles are already in flight. If disruption persists and economic damage mounts, that calculus could shift.
Iraq again finds itself at the intersection of competing sovereignties. Iranian-backed militias have attacked American positions; American and Israeli strikes have hit militia infrastructure on Iraqi soil. Oil production in Kurdish regions has been curtailed as a precaution. Baghdad’s authority is tested by forces operating both within and beyond its formal chain of command.
The Gulf Co-operation Council’s Peninsula Shield Force exists but has rarely been activated and remains heavily dependent on American backing. Whether it assumes a visible role will test the region’s collective-security architecture.
Turkey faces spillover of a different kind. Reports of Iranians crossing into Turkey have heightened fears of refugee flows. Ankara has prepared contingency plans and tightened border controls. Fragmentation in Tehran would reverberate across Turkey’s eastern frontier. Yet NATO membership and complex ties with Washington constrain Ankara’s manoeuvre. Its priority is to avert state collapse in Iran while condemning violations of sovereignty, even if that means preserving hardline elements that help maintain continuity and stability on Ankara’s eastern frontier.
Even Cyprus has been drawn in. A drone strike on the British base at Akrotiri underscores how the Levant and Gulf theatres are now operationally linked. European governments, already grappling with energy insecurity since Russia’s invasion of Ukraine, must again confront Middle Eastern volatility shaping continental markets.
Washington’s Unresolved Objectives
Washington’s declared objective is to eliminate imminent threats: degrade missile capabilities, dismantle nuclear infrastructure, weaken command-and-control nodes. Strikes have targeted enrichment and missile-production facilities; officials speak of air superiority and an impending uptick in operations.
Yet beyond degradation lies the unresolved question of political aims. Is this coercive bargaining? A return to negotiations on new terms? The weakening — or removal — of the Islamic Republic’s leadership? Air campaigns rarely transform regimes absent sustained ground presence. President Donald Trump has suggested operations may last weeks and has not ruled out further escalation. Without clear political objectives, military action risks sliding into attrition.
Following the death of Supreme Leader Ayatollah Ali Khamenei, Iran activated a three-member Interim Leadership Council pending selection of a successor. Constitutional continuity mechanisms appear to be functioning under wartime stress, though the leadership remains a potential target for further military action.
More fundamentally, the Islamic Revolutionary Guard Corps (IRGC) is deeply woven into the state’s fabric. With parallel military forces, control of missile capabilities and substantial economic reach through affiliated enterprises, the IRGC constitutes a power centre spanning military, economic and political domains. Many senior politicians are IRGC veterans.
To assume air strikes alone can unravel such institutional depth is optimistic. The greater risk is fragmentation. Iran’s demographic mosaic — with significant Azeri, Kurdish, Arab and Baluch populations concentrated near borders — contains latent fault lines. A weakened centre could embolden peripheral actors.
Fragmentation, however, need not produce liberalisation. It could instead generate localised authority structures dominated by IRGC commanders converting military power into territorial control. Iran might devolve not into a cohesive post-Islamic Republic democracy but into armed fiefdoms with uncertain legitimacy and heightened spillover.
American strategy must also contend with material limits. Precision-guided munitions and interceptors are being expended rapidly. Production takes time. Commitments in Ukraine and the Indo-Pacific strain capacity. Carrier deployments signal resolve — but also reallocation. Every asset concentrated in the Gulf is one unavailable in the western Pacific, a reality not lost on China.
The Proxy Variable
Iran’s network of regional proxies — Hezbollah in Lebanon, Iraqi Shia militias, Yemen’s Houthis — remains a critical variable, though degraded by Israeli operations in 2025. Trained and supplied by the IRGC’s Quds Force, they provide strategic depth and asymmetric leverage.
Weakened infrastructure and domestic constraints have reduced their capacity for decisive blows, but they remain dangerous. In this war they serve multiple purposes: opening additional fronts, raising costs for deeper incursions into Iran, and signalling Tehran’s continued reach.
Yet their expanded role carries risk. Overreach could provoke disproportionate retaliation in fragile states such as Lebanon or Iraq. Some may fracture under competing local and Iranian priorities.
So far Hezbollah has launched calibrated strikes while avoiding full-scale war. Iraqi militias have mounted sporadic attacks on American-linked targets. The Houthis retain the ability to threaten Red Sea shipping. The proxy network complicates military planning in both Tehran and Washington and binds multiple states to a widening conflict.
Russia, China and the Multipolar Test
Russia and China watch closely. Moscow maintains contact with Tehran, offering diplomatic backing and possibly technological assistance. A prolonged US–Iran confrontation diverts Western focus from Ukraine and strains American resources. Yet Russia also seeks stable corridors linking it to the Gulf and Indian Ocean; an Iranian collapse would jeopardise those ambitions.
Beijing’s approach is restrained but strategic. China remains a principal buyer of Iranian oil. Public statements emphasise restraint. Overt military involvement is unlikely. China’s priorities are pragmatic: secure energy flows, avoid regional conflagration and allow American distraction to persist. Open alignment with Tehran would jeopardise ties with Gulf monarchies. Limited escalation that absorbs American bandwidth may suit Beijing; a full closure of Hormuz would not.
Both powers face a credibility question. If they aspire to anchor a multipolar order, their response to pressure on a partner will be scrutinised. Diplomatic cover may not suffice; overt deterrence would risk escalation beyond their appetite.
“The system drifts toward managed instability — neither war nor peace, but an accumulation of cost.”
A War Without Endgames
The deeper shift is the institutionalisation of uncertainty. Investors recalibrate exposure to Gulf infrastructure. Energy importers reassess reserves and diversification. American planners weigh allocation across theatres. Regional states hedge more actively, deepening ties with multiple powers.
The Iran–Gulf war reinforces a pattern: coercion normalised, red lines blurred, resolution deferred.
The missiles over the Gulf and the halting of energy flows signal a global order adjusting to conflict without clear termination. The Middle East faces prolonged recalibration. Nation-states elsewhere will hedge economic and political risk more aggressively. The system drifts toward managed instability — neither war nor peace, but an accumulation of cost with unpredictable long-term consequences.
(Tomorrow: Part II examines the strategic implications of the war for India — its energy security, trade ties and diaspora.)
