The Middle East has entered one of its most dangerous phases in decades, with open war now raging between the United States–Israel on one side and Iran on the other.� Joint US–Israeli airstrikes on 28 February 2026 that killed Iran’s Supreme Leader Ayatollah Ali Khamenei have turned a long-running shadow war into a direct, multi-front conflict that is shaking the global energy system, financial markets, and the strategic environment of countries like India.�
What follows unpacks the roots of this war, its impact on Gulf states and the Strait of Hormuz, implications for India and its neighbours, effects on the world economy, and possible pathways to both short-term de‑escalation and long‑term solutions.
Roots of the current war
The present crisis is the outcome of three overlapping storylines: the US–Iran confrontation, Israel’s campaign against Iran’s nuclear and missile programme, and the post–October 7 reshaping of West Asian geopolitics.�
The October 7, 2023 Hamas attacks on Israel and the Gaza war pulled in Iran-backed groups like Hezbollah and the Houthis, widening the arena of conflict from Palestine to the entire “axis of resistance.”�
In 2025, Donald Trump (back in the White House) reopened nuclear talks with Iran but imposed a strict deadline; when talks stalled, Israel launched major strikes on Iranian nuclear and military sites in June 2025, in what became known as the Twelve‑Day War, with US participation.�
Iran retaliated with large missile and drone barrages on Israeli cities and US‑linked targets and paused nuclear negotiations, deepening mistrust on all sides.�
By early 2026, Iran was grappling with mass protests and harsh crackdowns, while the US built up military forces in the region and threatened further action.� The 28 February 2026 strikes that decapitated Iran’s leadership and hit nuclear, military, and energy sites were the tipping point that converted chronic tension into outright war.�
Where and how the war is being fought
This is not a single-front war; it is a regional system shock.
The main axes of kinetic fighting include Iran itself, Israel, US bases in Gulf states and Jordan, and the maritime zone around the Strait of Hormuz and the northern Arabian Sea.�
Iran is responding primarily with ballistic missiles, cruise missiles, drones, and proxy forces; the US and Israel are relying on airpower, precision strikes, and missile defence networks spread across the region.�
Civilian populations are heavily exposed: Iranian cities, Israeli urban centres, and Gulf hubs like Dubai, Doha, Manama, and Kuwait City have all suffered strikes, damage to infrastructure, and casualties.�
The result is not only a humanitarian crisis but also a severe blow to regional perceptions of security and stability.
Gulf countries: from safe haven to frontline
For years, Gulf monarchies marketed themselves as islands of stability – safe for investment, tourism, aviation, and transit – while quietly hosting US bases and maintaining calibrated relations with Iran.�
Iranian retaliatory strikes have hit airports, refineries, LNG terminals, luxury hotels, and residential buildings in the UAE, Qatar, Kuwait, Bahrain, Saudi Arabia, and even Oman.�
GCC foreign ministers have jointly condemned what they call violations of their sovereignty and warned they will take “all necessary measures” to defend their security, though they have so far stopped short of their own strikes on Iranian territory.�
Economically, damage to facilities such as Saudi refineries and Qatari LNG terminals has cut output and worsened the global energy crunch.�
Politically, Gulf leaders are caught between anger at Iran’s attacks, fear of being dragged into a full war, and dependence on US security guarantees.�
Strait of Hormuz: the chokepoint at the heart of the crisis
The Strait of Hormuz is the narrow maritime gateway between the Persian Gulf and the open ocean – and the single most important energy chokepoint in the world.�
In normal times, it carries about 15–20 million barrels per day of crude oil and condensate – roughly one-fifth of global seaborne petroleum trade – plus significant LNG volumes from Qatar and others.�
After the 28 February strikes, Iran’s Revolutionary Guard effectively shut down traffic through Hormuz via threats and attacks on merchant ships; tanker transits initially fell by about 70 percent and then dropped to near zero as hundreds of vessels waited outside the strait.�
Saudi Arabia and the UAE are rerouting limited volumes through pipelines to their Red Sea and Arabian Sea ports, but these routes can only carry a fraction of normal Hormuz shipments and are themselves vulnerable to attack.�
This single chokepoint disruption has stranded around 20 percent of global oil exports and badly hit LNG flows, amplifying the war’s global economic impact.�
Impact on India: energy, diaspora, and economy
For India, this crisis is not far away; it is in its primary energy backyard.
Energy security and inflation
India imports a large share of its crude and LPG from the Persian Gulf, with an estimated 2 million barrels per day normally transiting Hormuz.�
With Brent now above 100 dollars per barrel and LNG benchmarks up by around 60 percent since the war began, analysts warn of “imported inflation,” higher subsidy bills, and a drag on FY27 GDP growth.�
Shock to aviation, transport and manufacturing from costlier fuel could feed into broader price rises, complicating RBI’s inflation targeting and the government’s fiscal math.�
Indian workers and remittances
Around 9 million Indians live and work in Gulf countries; they send home roughly 50 billion dollars a year in remittances that support millions of families and bolster India’s external accounts.�
With attacks on Gulf energy, aviation and tourism hubs, many of these jobs face uncertainty, while physical security of Indian communities is a real concern.�
Analysts caution that prolonged turmoil could significantly dent these inflows, with some estimates explicitly flagging tens of billions of dollars of remittances at risk.�
Trade and financial markets
Shipping disruptions and insurance spikes on Gulf and Red Sea routes raise costs and delays for Indian trade in crude, petrochemicals, fertilisers, and manufactured exports.�
Global risk-off sentiment and higher energy prices have already put pressure on equity markets; commentary notes weaker openings for indices like the Sensex and Nifty when war news and oil spikes hit simultaneously.�
For a country that has worked hard to stabilise inflation and attract investment, a prolonged Hormuz crisis is a serious macroeconomic threat.
India’s official stand: balanced, cautious, and interest-driven
New Delhi’s public messaging has been consistent with its broader West Asia policy: avoid taking sides, emphasise sovereignty, and push for diplomacy.
Prime Minister Narendra Modi and the Ministry of External Affairs have expressed deep concern over the escalation, called for “maximum restraint,” and stressed that conflicts must be resolved through dialogue and diplomacy with full respect for territorial integrity.�
India pointedly distanced itself from a Shanghai Cooperation Organisation statement that condemned Israel’s attacks on Iran, refusing to join a consensus that singled out one party; this drew attention as a sign of India’s reluctance to be bound by SCO rhetoric on West Asia.�
At the same time, India maintains strong defence and technology ties with Israel, strategic energy and connectivity interests with Iran (e.g., Chabahar), and deep partnerships with Gulf states like Saudi Arabia and the UAE.�
Analysts describe this as a “pragmatic hedging” posture: publicly pro‑dialogue, privately focused on securing energy flows, protecting the diaspora, and keeping all doors open.�
Stands of India’s neighbours and major Asian actors
China
China has strongly criticised the US–Israeli strikes on Iran as violations of international law and called for an immediate halt to military operations and a return to talks.�
Beijing insists Iran’s sovereignty and territorial integrity must be respected and has condemned Khamenei’s killing as an “outrageous” assassination of a sovereign leader.�
At the same time, commentators note that China’s reaction has been relatively measured: it avoids fully taking Tehran’s side, clearly signalling that it wants flexibility to deal with whatever regime emerges in Iran after the war.�
China’s huge energy dependence on Gulf oil and gas underpins its push for de‑escalation.
Pakistan
Pakistan is trying to cast itself as a neutral mediator.
Islamabad has denounced both Iran’s attacks on Gulf countries and the US–Israeli bombing of Iran, stressing that it supports neither side’s use of force.�
Prime Minister Shehbaz Sharif has publicly offered to host “meaningful and conclusive” US–Iran talks in Pakistan, and Pakistani diplomats are reportedly sharing elements of US ceasefire proposals with Tehran.�
This mediatory role allows Pakistan to leverage its ties with Washington, Tehran, Riyadh and Doha simultaneously.�
Afghanistan (Taliban government)
The Taliban authorities in Kabul have taken a strongly rhetorical pro‑Iran, anti‑US line.
They condemned the US–Israeli strikes as “aggression” and expressed condolences over Khamenei’s killing, positioning themselves as defenders of sovereignty.�
Taliban spokesmen have said Afghanistan would “stand with” or cooperate with Iran if requested in case of further US attacks, even while saying they prefer a peaceful resolution.�
This underscores how the Iran question is reshaping alignments even among actors that have historically had complicated relations with Tehran.�
Bangladesh
Bangladesh’s focus is practical: protecting its citizens in the Gulf.
Dhaka’s foreign minister has said the government’s “first priority” amid the crisis is the safety and interests of Bangladeshi workers in the region.�
Bangladesh has reiterated its belief that war cannot solve problems and called for an early, peaceful resolution through diplomacy.�
Sri Lanka
Sri Lanka has taken a principled, UN‑Charter‑based position.
Colombo has expressed deep concern over the worsening Middle East situation, condemned attacks on civilians and civilian infrastructure, and warned about risks to global trade and the world economy.�
It has called for immediate de‑escalation, maximum restraint, and respect for sovereignty and territorial integrity, urging all parties to return to negotiations.�
For small, trade‑dependent states like Sri Lanka, disruptions to energy and shipping are existential economic issues.
Impact on the world economy and markets
Energy shock
The war has created what some agencies describe as the largest disruption in the history of the global oil market.�
Brent crude has surged above 100 dollars per barrel, more than 40 percent higher than just before hostilities; LNG prices in some benchmarks have jumped about 60 percent.�
By early March, combined oil output from Kuwait, Iraq, Saudi Arabia and the UAE was down several million barrels per day compared with pre‑war levels due to stranded exports and damaged facilities.�
Inflation, growth and recession risks
Economists now forecast higher inflation and lower growth across major economies compared to their pre‑war projections, with some explicitly warning of recession risks if the shock persists.�
Purchasing managers’ surveys for the US, eurozone, UK and Japan show slowing activity and rising cost pressures as high energy prices cascade through transport, manufacturing and services.�
Central banks that had been preparing to cut interest rates to support growth now face the opposite dilemma: whether to hold or tighten policy to contain war‑driven inflation.
Financial markets
Equities have sold off on war headlines, with indices like the Dow and S&P 500 registering clear falls as the conflict and energy shock unfolded.�
Analysts expect outperformance in energy stocks, gold and defence shares, and underperformance in energy‑intensive sectors and some emerging market assets.�
Some research houses argue that if the war is short and flows normalise, current price spikes will fade and quality assets in affected regions may become attractive “buy‑the‑dip” opportunities; if the conflict drags on and oil tests 130 dollars, the macro damage will be far more severe.�
Real intentions of the US and Israel (analytical view)
Official rationale
US and Israeli leaders frame their campaign as:
Preventing Iran from obtaining nuclear weapons or becoming a “threshold” nuclear state.
Degrading Iran’s ballistic missile and drone capabilities that threaten Israel, US forces and Gulf allies.
Responding to what they describe as years of Iranian aggression and non‑compliance with international norms.�
Israel, in particular, has long argued that a nuclear‑armed Iran is an existential threat and has opposed US–Iran deals that, in its view, leave Iran too much latent capability.�
Deeper strategic and political motives
Analysts and commentators point to additional layers:
Reasserting US deterrence and credibility after years of contested influence and “red lines” in the region.�
Using the window of a Trump presidency to pursue long‑deferred objectives against Iran’s nuclear and missile infrastructure, accepting short‑term escalation for long‑term gains.�
Domestic politics: in both the US and Israel, leaders under pressure at home may see strategic confrontation as a way to rally support, though this remains debated and cannot be proved definitively.�
In short, beyond stated security concerns, this war is also about power, prestige, and domestic political calculations.
The “reality” of Iran in this war
Regional strategy and proxies
Iran presents itself as the spearhead of resistance against US and Israeli dominance, but also pursues policies that many see as aggressive and destabilising.
It has built a regional network of partners and proxies – Hezbollah, various Iraqi militias, Palestinian groups, and the Houthis – that it arms and supports to project power and pressure adversaries.�
Its nuclear and missile programmes have advanced to the point where, even under strict monitoring, many Western and regional analysts worry about its potential to rapidly “break out” if it chooses to.�
Domestic system under strain
Iran has faced repeated waves of protests over economic hardship, corruption and repression; in early 2026, security forces reportedly used lethal force on a large scale to quell demonstrations.�
Khamenei’s death in the strikes has created a succession crisis in an already brittle system, fuelling concerns about internal power struggles and the direction of future policy.�
Iran’s choice to hit Gulf states and close Hormuz is rational from a coercive bargaining perspective – hurting US partners to force them to lobby Washington – but it also risks unifying its neighbours against it and accelerating longer‑term diversification away from Gulf energy.�
Future of the war: scenarios
Short, sharp war
Some geopolitical and economic assessments argue that, compared to the 2025 Twelve‑Day War, this conflict is larger but still likely to be time‑limited – several weeks to a couple of months – if all sides perceive that costs are outweighing benefits.�
In this scenario, the US and Israel significantly degrade Iran’s nuclear and missile infrastructure, while Iran inflicts enough economic and political pain to claim a form of “victory” but eventually accepts a ceasefire.�
Shipping gradually resumes under heavy escort and monitoring; energy prices fall back from their peaks over the course of 2026, though they may not return to pre‑war levels quickly.�
Prolonged or widening conflict
A darker path would involve:
Extended cycles of retaliation, with more intense proxy fighting in Lebanon, Iraq, Syria, Yemen and potentially Afghanistan.�
GCC states eventually moving from passive targets to active combatants, or at least providing more direct operational support to US–Israeli campaigns.�
Iran edging closer to nuclear weaponisation under the logic that only a bomb can deter regime‑change strikes, prompting counter‑proliferation pressures and regional arms races.�
This would deepen the global stagflation risk and make crisis management vastly harder.�
Quick, temporary solutions: what could de‑escalate now?
Realistically, any short‑term “solution” will be more of a conflict freeze than a real settlement, but some ingredients are clear:
An immediate, reciprocal ceasefire: suspension of US–Israeli strikes on Iranian leadership and energy sites; halt to Iranian missiles and drones against Israel, US bases and GCC infrastructure.�
Safe passage regime for Hormuz: Iran allows shipping to resume under international monitoring (possibly with UN or multinational naval oversight) in exchange for guarantees against certain categories of attacks on its territory.�
Humanitarian and economic stabilisation steps: evacuation corridors, aid flows, and short‑term financial support for the most exposed economies and sectors.�
Countries like China, Pakistan and Sri Lanka have all publicly called for an immediate halt to hostilities and a return to negotiations; Pakistan in particular is actively offering itself as a venue for US–Iran talks, with quiet support from other actors.�
Permanent solutions: what would it take to end this cycle?
A deeper nuclear and security bargain
Any lasting settlement would have to go beyond simply reviving the old JCPOA:
Stronger constraints and verification on enrichment, centrifuge R&D, and fuel stockpiles.
Parallel arrangements covering ballistic missiles and regional activities to address Israeli and Gulf concerns.�
Economic incentives for Iran that are robust to US domestic political swings – so that a change of administration in Washington cannot abruptly collapse the deal again.�
Regional security architecture
Over the longer term, West Asia needs some form of structured security dialogue that includes Iran, Arab states, and major external powers.
Core agenda items would be maritime security, missile deployments, drones, and non‑interference norms.�
Practical confidence‑building measures could include hotlines, advance notice of large exercises, and tacit or explicit limits on particularly destabilising weapons systems near chokepoints like Hormuz.�
The Palestinian issue and proxy demobilisation
Finally, many analysts argue that without progress on the Israeli–Palestinian file and on conflicts in Lebanon, Syria, Iraq and Yemen, the structural drivers of proxy warfare will remain.
The October 7 attacks, Gaza war, and broader Palestinian question are central to the narrative that Iran uses to justify its regional network of armed partners.�
Ceasefires, political reforms, and DDR (disarmament, demobilisation, reintegration) pathways for militias linked to Iran – alongside incentives for Arab states and Israel to support such processes – would be key ingredients.�
Closing thought
This war is not just about missiles and nuclear sites; it is about the unfinished business of the post‑Cold War order in West Asia. For India, and for any country tied into the global energy and trade system, understanding its roots and possible futures is essential – not only to manage immediate shocks, but to think seriously about diversification, diplomacy, and long‑term strategic autonomy.
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