A Critical Analysis Ambassador - Professor Doctor Manuel Hassassian

The outbreak of the Iran war traces back to a long list of indirect and accumulating causes, most importantly, Tehran's nuclear program. This conflict has become a focal point of strategic interest in the Middle East. On one hand, Israel views the prospect of a nuclear Iran as an existential and immediate threat, adjusting its security parameters accordingly. On the other hand, the United States interprets the conflict through the lens of nuclear non-proliferation, stressing international regulatory standards instead of regional insecurities. In 2015, the collapse of the Joint Comprehensive Plan of Action (JCPOA) nuclear agreement signified a monumental breaking point, as it lifted previous restrictions on Iran's nuclear armament capabilities. As a result, Iran accelerated its uranium enrichment activities and no longer complied with international cooperation, thereby exacerbating tensions and fears.

Of course, Israel has always perceived the Iranian regime as an existential security threat. Within this frame, the role of the U.S. in this trilateral power struggle highlights a myriad of varied strategic interests, based on the constant flow of oil at reasonable prices and the control over regional powers under its umbrella. However, the primary objective is to disable Iran's nuclear facilities and potential development. Further to that, the U.S. attempts to de-escalate the situation from spiraling into a world war, averting collapse in the Gulf, safeguarding the interests of its allies, and securing unhindered passage for maritime navigation, especially the Strait of Hormuz. Another significant wrinkle is the maintenance of worldwide energy flows, most notably through Bab el-Mandeb and the Strait of Hormuz, a key chokepoint and a critical passage for approximately one-fifth of international oil trade. Any geopolitical instability on this vital route creates ripple effects that impact the global landscape and local political structures in the U.S., visibly reflected in petrol prices. This interplay of dimensions and drivers shifts the conflict into a worldwide economic catastrophe instead of an exclusively regional issue. In turn, spiraling inflation, an increase in the prices of commodities, insurance rates, and the credit crunch become inevitable.

The Iran war has proven more complex and lengthier than originally expected, but it turned out to be otherwise, a blitzkrieg failure. Due to this protraction, the need for wider international support has become a priority, especially from the European Union, while revealing the drawbacks of regime-change tactics. Increasing oil prices and fluctuating cost-benefit analysis showcase the severe economic hurdles pertaining to the conflict. The war can be assessed through four different domains—strategic, political, economic, and military—demonstrating a disproportionate outcome. While a clear victor is yet to be determined, all parties involved have suffered heavy losses.

Iran has endured many costs, including military attrition, chiefly the deterioration of proxy organizations and the backbone of its arsenal, as well as economic sanctions through currency volatility and halted oil export capacity, not to mention its deterring military capabilities. Locally, the Iranian people are undergoing difficulties, but not in any way that compromises the regime's status quo and its power control. Strategically, Iran is subjected to a high level of scrutiny. Conversely, Iran gains some hidden advantages: the structural integrity of the ruling order is maintained, bolstering its prevailing narrative as a formidable force countering U.S. and Israeli dominance, legitimizing its proxy networks, and solidifying its overall defensive and deterring stature.

A more comprehensive evaluation indicates that Iran is sustaining substantial military and economic damage while attaining moral victories in the regional court of public opinion. In parallel, the U.S. is burdened by military and financial overhead, in tandem with risks of broader escalation, domestic political pressures, and possible tarnishing of its credible image on the world stage. On the plus side, it also enjoys a strong axis with Israel and the Gulf, as well as a fortified deterrence front, while partially suppressing the influence and geopolitical bravado exerted by Iran in the Middle East.

Israel's stance showcases the same duality. It undergoes security hurdles on multiple fronts (particularly from Hezbollah and the Houthis), a dwindling tourism sector, a loss of investor confidence, endangerment of civilian infrastructure to military bombardments, and mounting pressure from the international community. Simultaneously, it benefits from unwavering U.S. support, reinforced defensive capabilities, and improved intelligence coordination as it targets key Iranian strategic locations.

Moving beyond the main belligerents, the conflict creates major domino effects on the regional and international scale. Such effects include increased regional unrest, fluctuations in energy prices, instability in world commerce, and rising humanitarian threats. There also exist many unforeseen repercussions experienced by other international third-party actors. For example, Russia is witnessing a windfall from rising energy costs and is exploiting the shifting focus of U.S. attention away from the Ukraine war to challenge Western influence. Moreover, China positions itself as a potential diplomatic mediator and secures unfettered access to exclusive energy deals. In the same vein, non-state actors continue to gain influence as they leverage their bargaining power within this turbulent market, further distorting traditional dynamics. In addition to what was noted previously, the Palestinian issue risks being shunned from the political spotlight without making real, actionable progress on the ground. All in all, there is no definitive victor at this juncture.

The conflict is also redefining the regional landscape in the context of power control. Two emerging camps can be distinguished: a United States-Israel-Gulf security axis (comprising Saudi Arabia, the United Arab Emirates, Jordan, and Egypt) and an opposite competing bloc revolving around Iran and its proxies (including Hezbollah and allied groups across Iraq, Syria, and Yemen). This interplay echoes back to a Cold War-like dynamic within the region. Israel's role is transforming into that of a central military arm within the U.S. regional security apparatus, coupled with deepened security, economic, and diplomatic ties with the Gulf countries. Concurrently, the broader international system is seemingly undergoing a systemic shift from a unipolar structure dominated by the United States toward a more fragmented multipolar reality of overlapping blocs.

Other strategic imperatives add another layer to the issue. The U.S. aims to curb the influence of Russia and China, blocking their sustained diplomatic presence and military expansion. Israel seeks to constantly counter Iran's nuclear goals and collapse its military networks in the region, including Hezbollah and Hamas. These important considerations intertwine with and reframe the Palestinian cause, which becomes subsumed into larger regional skirmishes. Despite gaining renewed international visibility, no tangible political progress will be achieved to resolve this conflict unless through an independent and dedicated diplomatic path, including political engagement from Israel.

The direct consequences of the Iran war transcend both the regional and the global. Within the Middle East, widespread destabilization and increased proxy activity across secondary theaters in Lebanon/Syria/Iraq/Yemen are elevating the risk of a profound spillover effect. The security architecture of the Gulf states undergoes intensified militarization, while persistent threats to shipping routes in vital maritime corridors keep global energy markets in a state of flux. On the global stage, the crisis sharpens geopolitical competition among great powers, with Russia and China capitalizing on the instability to widen their strategic influence and push for alternative security arrangements, thus trying to contain the hegemonic control of the region by the United States.

The economic impacts are equally severe. Volatile energy prices drive up worldwide inflation, placing a heavy burden on import-reliant countries, particularly Europe and the Global South. Supply chain bottlenecks, particularly in the Gulf, further strain an already vulnerable global market. Meanwhile, at the institutional level, the war compromises the credibility of multilateral institutions such as the United Nations and undermines international legal norms regarding non-intervention and sovereignty while encouraging the possibility of nuclear proliferation. All in all, these shifts suggest that the Iran war is no longer a regional concern; it has evolved into a monumental geopolitical fiasco that has sent shockwaves throughout the world as it accelerates fragmentation and proxy warfare, intensifies instability, and weaponizes interdependence, where energy, finance, and shipping lanes are being used as political tools of coercion.

Ultimately, the Iran war carries major implications for today's globalized financial system, specifically the hazy future of the petrodollar. Rather than an abrupt overhaul of the global order, we are witnessing incremental and structural changes, evidenced by the emergence of digital currencies, new regional settlement systems, and multi-currency energy trade (USD, RMB, and Euro). By adopting more diversified financial approaches and maintaining security relations with Washington and diplomatic as well as economic channels with Beijing, Gulf energy producers are adapting to a shifting landscape to hedge against the geopolitical risks posed by the war. In essence, the war serves as a primary catalyst for ongoing transitional trends toward global fragmentation, intense multipolar competition, and a reshaping of regional dynamics.

Immediate steps are required to be taken for a plausible end to the war, which include, but are not limited to: geographic containment of hostilities in Lebanon/Syria/Iraq/Yemen, protection of maritime trade, preservation of shipping corridors linked to the Gulf, commitments from all sides to avoid attacks on critical energy infrastructure, dual-track structured negotiations under the impartial mediation of the International Atomic Energy Agency (IAEA), nuclear de-escalation facilitated by international organizations, and open dialogue for a regional security track involving Gulf states such as Saudi Arabia and the UAE.

The recent U.S.-Iran negotiations mediated by Pakistan are likely to collapse due to deep structural divides rather than small tactical disagreements. Key issues are yet to be resolved during these brokered negotiations, further complicated by the current conflict between Israel and Lebanon, as well as maritime tensions in the region between Iran and the United States. If diplomacy truly fails, especially if Iran restricts shipping routes, the grim potential of military escalation would severely throttle international energy supplies and trade chains. This abysmal failure would box the regional players into an inescapable security dilemma, where the risk of strategic error outweighs any possibility for a peace deal. Economically, this would trigger a wave of systemic repercussions that will be felt for years to come: soaring oil prices, fiscal pressure, rising shipping insurance costs, stagnant growth, and higher inflation that would certainly crumble major energy-dependent economies.

History has demonstrated that a military solution is not a viable long-term solution; therefore, alternative strategies are necessary to end the current quagmire. One approach could be the Oasis Plan, which prioritizes economic development and cooperation between contending parties. The Oasis Plan can help in the de-escalation process by shifting incentives from zero-sum conflict to shared economic gains through large-scale infrastructure projects, especially in the fields of water, energy, and infrastructural development. By improving livelihoods and fostering cooperation between nations, it can create an environment of total collaboration and dependency on each other across political, economic, social, and cultural spheres, laying the practical foundations for sustainable diplomacy and long-term peace. In general, through mutual economic partnership and political dialogue, the deep-seated rift between the U.S., Israel, and Iran may reach an agreement to uphold international humanitarian laws and effectively put the new social and political order into perspective. While wars offer only temporary quick fixes, they are untenable to the longevity of peace and order. Only through reciprocal dialogue and serious negotiations will issues of conflict be resolved with painful concessions that parties in conflict should live with and endure.