The Middle East on fire, part one: War, Oil, and why Iran will not break quickly

The Middle East is at war. Not in the low-intensity, proxy-managed sense that analysts have grown comfortable discussing. A direct, multi-theater military confrontation between the United States, Israel, and Iran is now two weeks long. Oil briefly reached $120 a barrel on March 8 before retreating towards 90$. This is a sharp signal of market stress. Keep in mind that oil was at about 60$ a barrel in January 2026. The Strait of Hormuz is now almost completely closed, limiting the supply of one-fifth of global oil supply. Gulf capitals are being targeted by Iranian missile, mines and drone strikes. On March 9, Iran confirmed Mojtaba Khamenei as the new Supreme Leader, replacing his assassinated father. He has already told the world Iran is ready for a long war.

Any organization with supply chains, capital, and business exposure to this region should treat the pre-February 28 risk baseline as no longer valid. This is unfortunately not a crisis with a quick end. This is a structural crisis with a lot of unknowns. Part One of this article, covers how the war started, what the energy shock means for global markets, and why Iran's strategy is built to run for months, not weeks. Part Two covers what the war has done to the Gulf's AI, sports, tourisms and diversification visions, why expatriates are leaving, and what boards and risk managers must do right now.

Operation epic fury: How the war started

On February 28, 2026, the United States and Israel launched coordinated strikes on Iran. The U.S. stated its objectives being to destroy g Iran's ballistic missile program, eliminating its nuclear capability, and removing a government that has been a major source of terrorism. Israel's goal was regime change and the  dismantlement of Iran's military threat. President Trump told reporters that Iran had no navy, air force, or air detection capability left after the first wave of these attacks.

The strikes killed Iran Leader Ali Khamenei, destroyed significant IRGC command capacity, hit Iran's communication capabilities, and targeted its parliament. Iranian officials confirmed the deaths of senior commanders and family members of Khamenei. Iranian state media reported also that a school near a military complex in Minab was struck, with Iranian authorities claiming 180 killed, mostly children. Independent verification is not yet possible. The civilian lost inside Iran, according to the Iranian Red Crescent Society and human rights monitors, stood at over 1,200 by day nine, though independent confirmation remains difficult. These figures, contested or not, are shaping international opinion and will have long-term consequences for U.S. and Israeli standing across the Muslim world and potentially across Europe.

Iran responded with retaliatory strikes against Israel, U.S. military assets, and every GCC state hosting American forces: Bahrain, Kuwait, Qatar, Saudi Arabia, the UAE, Jordan, and Iraq. In subsequent days, Iranian strikes also reached Azerbaijan and Cyprus, where the RAF base at Akrotiri sustained drone damage. By day nine, seven U.S. service members had been confirmed killed, six of them Army reservists who died when a drone struck a tactical operations center at the port of Shuaiba in Kuwait on March 1. The sinking of the Iranian warship IRIS Dena by a U.S. submarine, resulted in the deaths of over 100 crew members.

On March 9, Iran formally confirmed Mojtaba Khamenei as Supreme Leader. The IRGC and all key power centers rallied behind him within 48 hours of his father's death. Russia's Putin wrote to reaffirm Moscow's support. The new leadership ruled out any talks while under attack. Kamal Kharazi, foreign policy adviser to the supreme leader's office, said publicly that the war ends through economic pain, not diplomacy. That is not a negotiating position. That is a war manifesto.

The IRGC has stated it is directing 60 percent of its offensive firepower at U.S. security and diplomatic assets in the Gulf, treating Washington, not Jerusalem, as the primary target. The Gulf states are being hit not because Iran has a direct grievance with Kuwait or Bahrain. They are being hit because they host the operational infrastructure of American military power in the Gulf region. That matters significantly for every risk assessment being conducted right now.

Oil touched $120: The largest energy disruption in history

Crude oil briefly touched $120 per barrel on March 8 before markets pulled back on news of potential strategic reserve releases. The spike is less important than what it signals: the market is pricing in a prolonged disruption, not a short one. The IMF described this as the largest energy disruption in history and warned policymakers to prepare for what it called the unthinkable. G7 finance ministers called an emergency meeting on March 9 to coordinate a strategic reserve release, and on March 11th,  they agreed to release 400 million barrels of oil from the strategic reserve. That is a short-term instrument applied to a long-term problem.

The Strait of Hormuz, which is one of the leading oil corridor where roughly one-fifth of global oil supply passes every day (nearly 20 million barrels per day), is near blocked. GPS jamming is intensifying. Iran has now begun actively laying mines in the Strait. The U.S. military destroyed 16 Iranian mine-laying vessels on March 10, but the threat is not contained. Shadow fleet activity is exacerbating market stress. The Red Sea, already under pressure from the Houthi activity in Yemen since 2023, faces renewed challenges as the Houthis are increasing their attacks on shipping and U.S. military. Israel is now targeting Iranian energy infrastructure, striking oil storage sites in Tehran. Iran has threatened to respond against regional energy facilities. If that exchange escalates, the $120 touch becomes a floor, not a ceiling, and Iranian can push oil prices as high as 200$ per barrel.

The downstream consequences are visible. Shipping costs are raising. Food commodity prices rise as freight costs compound quickly. Sovereign budgets in import-dependent economies across Africa, South Asia, and Latin America come under acute pressure. Inflation reappears suddenly from a supply side that central banks cannot fix. This is a global economic event, not a regional one.

Iran prepared for this war for forty years

The strategic assumption in Washington and Tel Aviv was that Iran, weakened by sanctions, battered by domestic protests in January 2026, and degraded by the twelve-day war with Israel in June 2025, would crack under direct military pressure. That assumption is being tested in real time and the early results are not encouraging.

Iran did not build its missile arsenal, its drone production capacity, its proxy network, and its doctrine of asymmetric warfare by accident. It built them over four decades, specifically to absorb and respond to a U.S.-Israeli military strike. Iran's primary proxy fronts are well documented: Hezbollah in Lebanon, Shia militias in Iraq, the Houthis in Yemen, Hamas and Islamic Jihad in Gaza, and influence networks across Syria. The Assad regime's fall in 2024 weakened the Syria corridor, and Hamas and Hezbollah absorbed heavy losses in 2024 and 2025. But the core architecture remains. The Houthis are active. The Iraqi militias have capacity. Hezbollah launched missiles into northern Israel on March 2.

The death of Khamenei does not end that the Iranian ability to strike. It may harden it. Mojtaba Khamenei's confirmation on March 9 confirms institutional continuity, not fracture. The IRGC has regrouped behind him. Risk models pricing this as a two-to-four-week event are wrong. A strategy built on economic pain over diplomatic resolution can run for months without requiring Iran to win a single conventional military engagement.

Radical islam, failed states, and the conditions for radicalization

The immediate military confrontation sits on top of a structural layer of instability that predates it and will outlast it. Where states fail to deliver jobs, security, or basic political participation, extremist naturally fill the gap. That is not an ideology, that is governance failure, and it is endemic across Iraq, Iran, Syria, Libya, Yemen, and much of North Africa and the Sahel.

Military pressure alone does not terminate these movements. Dispersed networks adapt and reconstitute and sometimes get bolder because of attacks as they are able to fund-raise tapping into the anger and resentment. Youth unemployment, sectarian exclusion, corruption, and foreign military presence, have all intensified since February 28, 2026. An active war in which the United States is conducting military operations in a Muslim-majority country, with reported civilian casualties accumulating daily in Iran, creates the conditions in which radicalization expands. Historical precedent from Iraq, Afghanistan, and Libya supports this assessment regardless of the fact that 80 % of Iranian may have wanted regime change. The ideological consequences of this conflict will run well beyond the current military phase unless the root drivers of violent extremism are addressed structurally.

The gulf monarchies: Stable until they are not

Saudi Arabia, the UAE, Qatar, Bahrain, and Kuwait all condemned Iran's strikes towards the Gulf Countries. They are not neutral in this conflict. But they don’t want a war. Their rulers must defend from Iranian missile while managing domestic populations that are at times sympathetic sympathy for Iranian and Palestinian grievances against the United States and Israel.

Rulers who align too visibly with the U.S.-Israel operation may risk undermining their own legitimacy. Rulers who distance themselves expose themselves strategically. There is no clean position, and the pressure increases with every week the war continues. The Gulf's authorities have built stability through oil-funded social contracts. This stability is now in question. This conflict stress-tests that model in ways it has not tested before. Succession risk, elite fractures, and the absence of legitimate political channels mean that when transitions come in this region, they are not managed smoothly but happen abruptly.