Analysis: The war on Iran is at a crossroads

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The Middle East may be at a turning point. For the first time in decades, Gulf cities such as Dubai and Doha face risks to their economic stability, which depends on access to global markets and steady trade. Airspace restrictions and regional conflict have forced airlines to reroute or ground flights. Foreign investors are now questioning the region’s investment safety.

The war is challenging the Gulf states’ economic model, developed over the past 20 years.

Dubai, Doha, and Manama were built on the expectation that regional stability would attract global investment despite ongoing political tensions. This premise is now in serious jeopardy. Airports operate at reduced capacity, airlines have moved aircraft for security, and Bahrain has reportedly stationed civilian planes abroad as a safeguard.

For decades, US military bases in the Gulf deterred Iran and protected Washington’s allies. But the war has now raised a pressing question: Have these bases become part of the security problem they aimed to solve?

To understand what is happening now, we need to look back to 2020, when US President Donald Trump ordered the killing of Iranian Revolutionary Guard commander Qassem Soleimani in Baghdad. This event marked a turning point in the conflict between Washington and Tehran.

This strike made Iran’s leaders significantly more cautious.

Before Soleimani’s killing, Iran relied on a strategy of calibrated pressure through its regional network of partners and proxies. The September 2019 drone attacks on Saudi Arabia’s Aramco facilities, claimed by the Houthis, illustrated this approach: the use of force without crossing the threshold of direct war with the United States.

The attempt to storm the US embassy in Baghdad in late 2019 prompted Washington to act. In Trump’s view, killing Soleimani redefined the rules of engagement.

Soleimani’s death left a major void in Iran’s decision-making. He wielded considerable authority within the Revolutionary Guard and among military leaders, and many trusted his capacity to manage crises. After his death, Iran became more cautious and less likely to provoke a direct confrontation with the United States.

Nonetheless, caution did not halt Iranian activity. The country expanded its military, increased its missile arsenal, and accelerated drone development. The war in Ukraine unexpectedly became a testing ground for Iran’s drones, providing valuable lessons for improvement.

Meanwhile, Iran’s regional influence declined.

The fall of Bashar al-Assad’s regime in Syria in December 2024 removed the central pillar of Iran’s regional axis. Tehran lost its strategic bridge to Lebanon and the Mediterranean, which had existed for more than 40 years. Syria no longer served as Iran’s strategic depth and immediately shifted from being an ally to a sworn regional foe.

In Iraq, Iran’s grip on armed groups weakened under mounting domestic pressure. In Lebanon, Hezbollah retained military strength but lost strategic leeway. In Yemen, the Houthis remained closest to Iran’s core interests.

During this time, Tehran tried to show it was open to diplomacy. The agreement with Saudi Arabia, brokered by China in 2023, was a major step, and Iran’s relations with other Gulf states and Egypt slowly improved. Iran also took part in several rounds of nuclear talks with the United States and other major powers.

Then, Israel’s genocidal war on Gaza began.

That conflict changed how Iran made its strategic decisions. The strong caution after Soleimani’s death started to look like weakness to Iran’s enemies, even though some in Tehran saw it as patience to avoid a fight on bad terms.

At first, Tehran tried to keep the conflict from growing and avoid a direct fight with Israel or the United States. But each time Iran held back, it appeared to be sending the wrong message.

The 12-day war followed, and Iran suffered heavy losses, including damaged nuclear infrastructure.

Since the end of that war, however, Tehran has focused on rebuilding military capabilities, especially drone production.

The most significant change is strategic. Rather than containing the conflict within its borders, Tehran now appears more willing to expand it regionally. The aim is not only military retaliation but also to transform the war into a broader regional crisis that could disrupt global energy markets, threaten maritime routes, and destabilise international air travel.

In short, Iran appears determined to reclaim its image as the region’s disruptive power rather than a weakened actor.

This shift has complicated Washington’s strategic calculations.

Trump assumed that sustained military pressure might force the Iranian regime towards internal collapse or acceptance of stricter US terms. However, events have unfolded differently.

Instead of mass protests, domestic anger in Iran has shifted towards a sense of existential threat, especially after Trump suggested the war could alter Iran’s borders. The assassination of Supreme Leader Ali Khamenei during the war, followed by his son’s elevation as successor under wartime conditions, also gave unexpected momentum to the regime’s political survival.

On the battlefield, the war has begun to expand across multiple fronts.

Hezbollah’s entry into the conflict opened a new front along Israel’s northern border, the closest direct point of confrontation between Iran and Israel. Reports of coordinated strikes between Hezbollah and Iranian forces, along with increasing clashes between Hezbollah fighters and Israeli troops, suggest this front could become the war’s central arena.

Currently, the Yemeni front remains relatively restrained, while Iraqi factions focus on limited attacks and other regional dynamics. If these fronts fully activate, the war could expand into the Red Sea and potentially threaten the Suez Canal, one of the world’s most critical trade routes.

In Washington, anxiety is rising that the conflict could escalate further. After an intelligence briefing, US Senator Richard Blumenthal, a Democrat, warned that the Trump administration’s approach could eventually lead to the deployment of ground forces in Iran.

In Tehran, statements from figures such as security chief Ali Larijani indicate that Iran is prepared to escalate further at sea. The Strait of Hormuz is now part of a strategy to transfer the costs of war to the global economy. If Tehran moves to mine or close the strait, the confrontation could quickly become a global energy crisis.

Gulf states now find their strategic assumptions under scrutiny. Years of warnings from regional diplomats about unchecked escalation have shifted to open concern about whether the US–Gulf security framework still guarantees stability or exposes the region to greater risk.

Amid these developments, a more troubling question is circulating among policymakers and analysts: What if Iran’s new leadership decides the war provides an opportunity for a nuclear breakout?

There is no public evidence that Tehran has made this decision. However, Iran possesses large quantities of highly enriched uranium, and the political constraints that once limited its nuclear ambitions may have shifted, first due to the former supreme leader’s religious ban on nuclear weapons until his assassination, and second as a result of the war. If Iran were to conduct its first nuclear test during the conflict, the war would enter a new phase, potentially altering both the regional balance of power and global nuclear norms.

In this context, the US president now faces three difficult options.

The first is to expand the war in pursuit of regime change in Iran, which risks a full regional conflict. The second is to declare limited strategic success and attempt to rebuild deterrence. The third is to continue the war at its current intensity, accepting the growing political and economic costs.

Each of these choices would change the Middle East for years to come.

One thing is clear: the region has reached a turning point. This war could change the rules of the regional order, even though no side seems to have a clear plan for the day after.