After months of escalating threats against Tehran, the administration of President Donald J. Trump crossed the Rubicon on February 28, launching Operation Epic Fury[1] in coordination with Israel. Within forty-eight hours, Israeli forces had assassinated[2] the Islamic Republic’s third Supreme Leader, Ali Khamenei, along with dozens of senior Iranian security officials. Such strikes immediately shattered any remaining guardrails against a broader war. Operation Epic Fury has quickly metastasized into a regionwide conflagration, with Tehran responding in manners aimed at bringing more countries into the fray and destabilizing its neighbors.
Iranian retaliatory barrages have struck not only Israel but also American, British, and French military assets, as well as civilian and energy infrastructure across Bahrain, Cyprus, Iraq, Jordan, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. Iran carried out a drone operation, hitting[3] near the U.S. consulate in Dubai, the U.S. embassy in Saudi Arabia, prompting[4] an indefinite closure of that diplomatic mission as well as the American embassies in Kuwait and Lebanon. Pro-Iranian factions in Iraq have waged attacks[5] of their own targeting the U.S. military. Israel, for its part, has expanded its campaign into Lebanon[6] and Iraq.[7]
How long these hostilities will persist before a ceasefire takes hold remains uncertain. Trump has suggested that the campaign could unfold over four or five weeks. Yet with Iran’s leadership ruling out diplomatic engagement with Washington and with Tehran perceiving strategic value in prolonging the conflict to shape the calculations of the United States and European governments, there is ample reason to expect far more protracted warfare. This round of fighting may well outlast the 12-day Israel-Iran war of June 2025 and extend beyond even Trump’s projected timetable.
Oil prices have already climbed sharply above US$100, and should the conflict continue to intensify and draw in additional actors, further spikes are all but certain. The resulting resurgence of global inflation would place renewed pressure on central banks to respond in ways that dampen global economic growth.
Iran targets the Gulf’s energy infrastructure
In addition to launching missiles and drones at bases hosting American forces, as well as airports, hotels, desalination plants, ports, and residential complexes, Iranian forces have targeted critical energy infrastructure across the GCC. Tehran is aiming squarely at the Gulf Arab states’ centers of economic gravity. These are the foundations upon which GCC members’ prosperity and stability rest. Such attacks on these strategic sectors amount not merely to escalation but to an existential threat to the GCC states’ economies.
Ultimately, the Islamic Republic appears intent on imposing costs not only on its neighbors in the GCC but also on a wider circle of states for the American-Israeli bombardment of Iran. Tehran’s objective is to alter Washington’s calculus and persuade the United States that its optimal course is to suspend military operations, press Israel to do the same, and accept an immediate ceasefire. Iranian officials recognize that the Gulf Arab states do not regard the American-Israeli-Iranian confrontation as “their war”[8] and have little tolerance for prolonged instability on their territory. This assessment informs Tehran’s belief that leaders of GCC members, who are seeking to shield their own countries’ economies and domestic stability, may be inclined to leverage their influence in Washington in favor of de-escalation.
In this context, Iran is likely calculating that leaders with established personal ties to Trump, including Saudi Crown Prince and Prime Minister Mohammed bin Salman, UAE President Sheikh Mohamed bin Zayed Al Nahyan, and the Emir of Qatar Sheikh Tamim bin Hamad Al Thani, could use their access to press the White House toward an immediate ceasefire. Whether such expectations are well-founded remains uncertain, but they form a central pillar of Tehran’s current strategy.
Iran’s war on Gulf Arab energy
On 2 March, Saudi authorities announced[9] that the Ras Tanura oil refinery sustained “limited” damage from falling debris after the interception of two Iranian drones targeting the facility. Situated near Dammam on the Kingdom’s eastern coast, Ras Tanura is Saudi Arabia’s largest domestic refinery and ranks among the most significant in the world. With a processing capacity of 550,000[10] barrels per day, it is a critical supplier of diesel and other transport fuels to European markets, while also producing gasoline in smaller volumes. This incident prompted a precautionary and temporary shutdown[11] of the facility.
That same day, QatarEnergy, which is Qatar’s state-owned energy conglomerate and the world’s leading producer of liquefied natural gas (LNG), announced[12] the suspension of LNG output after Iranian military strikes targeted its operational hubs at Mesaieed Industrial City and Ras Laffan Industrial City. The decision marked a significant escalation in the conflict’s economic fallout, signaling direct disruption to one of the most critical arteries of the global energy market and underscoring both the vulnerability of vital energy infrastructure and the broader risks this conflict poses to global energy security.
Hormuz closure and global energy risks
Iran has followed through on its threat to close the Strait of Hormuz in the event of an attack. Two days into the war, Tehran announced[13] the measure and has since launched strikes against five vessels transiting the narrow chokepoint, through which roughly 20[14] percent of the world’s oil and LNG supply passes. As a result of these actions, at least 150[15] ships have been left stranded, while the Islamic Revolutionary Guard Corps (IRGC) has warned[16] that any additional vessels attempting to cross will be set ablaze.
Shutting down the Strait carries immense economic costs for Iran itself. Yet this drastic step reflects Tehran’s response to the war waged against the Islamic Republic by the United States and Israel. Each month, some 3,000[17] ships pass through the Strait of Hormuz, the majority transporting crude oil and LNG. Major Asian economies, chiefly including China, India, Japan, and South Korea, depend heavily on LNG shipments from the GCC states that move through this corridor, underscoring the extent to which the unfolding crisis in the Gulf imperils global energy markets and the economic stability of key importers.
Predictably, this escalating U.S.-Israel-Iran war has rapidly transmitted through global energy markets, driving immediate price shocks in crude oil and retail gasoline. In the United States, average gasoline prices climbed[18] roughly 10–11 cents in 24 hours to about US$3.11 per gallon, while benchmark U.S. crude rose[19] between 8% and 8.6%, reaching approximately US$72–77 per barrel, and Brent crude increased to roughly US$77–82 per barrel. Analysts characterized the move as a “knee-jerk reaction,” adding US$3.75–5 per barrel for crude, with Brent more affected than West Texas Intermediate. The disruption is closely tied to Iran’s closure of the Strait of Hormuz.
Iranian strikes on regional energy facilities and threats to tanker traffic, alongside rerouting and halted operations by shipping companies, have heightened fears of supply chain interruptions. Because oil is priced on a global market, these disruptions affect even net exporters like the United States, particularly as domestic refineries are configured for heavier imported crude. Analysts warn that a prolonged conflict could push Brent prices above US$100 per barrel, amplifying inflationary pressures and prolonging volatility in fuel markets.
The burden has been especially acute in Europe, which is a net energy importer, where diesel prices surged[20] 27% (about US$0.62 per gallon) amid constrained supply, prompting visible consumer responses such as fuel queues in France. In the United States, price increases are unfolding alongside the seasonal shift to more expensive summer gasoline blends, compounding pressure at the pump upward and potentially sustaining higher prices for weeks or months. Although the United States accounts for roughly 22% of global oil production and has been more insulated from shocks since the 1970s energy crises, global supply interdependence limits its immunity.
Iran, which represents more than 4% of global oil production and borders the Strait of Hormuz, occupies a pivotal role in market stability; disruptions there reverberate worldwide through both physical supply constraints and speculative trading dynamics. Market analysts project that national gasoline averages could rise back above US$3 per gallon, with localized prices nearing US$4, underscoring how this escalating and expanding conflict, logistical chokepoints, and seasonal demand cycles are converging to elevate consumer energy costs.
On 1 March, OPEC+ announced[21] a production increase larger than many had anticipated. While the group exceeded its initial projections, it stopped short of a more aggressive boost, reflecting the delicate balance it faces between managing near-term geopolitical risks and avoiding an oversupply later in the year. With oil flows through the Gulf potentially constrained for an extended period of time, additional output may offer only limited immediate relief, making access to export routes far more critical than headline production targets.
In recent weeks, Saudi Arabia has increased its own crude shipments, a move analysts interpreted as a short-term buffer ahead of U.S. and Israeli military operations. Saudi exports reached[22] approximately 7.3 million barrels per day in the first 24 days of February, which is the highest level since April 2023. A similar strategy was employed in June 2025 amid the United States’ Operation Midnight Hammer. Iran, meanwhile, also boosted its oil exports in the run-up to negotiations with Washington. Even so, these buffers are inherently finite, designed to mitigate short-term shocks rather than compensate for prolonged structural disruptions.
The broader impact on the global economy will depend largely on the trajectory of oil prices. As a fundamental economic input, rising crude prices ripple through the costs of goods and services worldwide. In general, a 5 percent year-on-year increase in oil prices typically adds[23] roughly 0.1 percentage points to average inflation in major economies. Therefore, a rise in Brent crude to US$100 per barrel could, under this framework, contribute[24] an additional 0.6–0.7 percentage points to global inflation.
The high stakes of escalation
The rapid escalation of hostilities following the launch of Operation Epic Fury highlights the fragility of regional security in the Middle East and the interconnectedness of global energy markets. Tehran’s retaliatory campaign, targeting not only Israel but also Gulf Arab states’ energy infrastructure and the Strait of Hormuz, underscores both the Islamic Republic’s military reach and its willingness to impose significant economic costs to shape international responses. The attacks on Saudi Arabia’s top oil refinery, Qatari LNG facilities, and maritime traffic have already triggered immediate price shocks, causing a sharp rise in oil prices and fueling inflationary pressures worldwide.
For the United States, Europe, and Asia, these developments demonstrate how rapidly geopolitical conflicts in the Gulf can reverberate through global supply chains, disrupting energy access and elevating consumer prices. Even short-term spikes carry the risk of sustained economic consequences, particularly if the conflict extends beyond Trump’s projected timeline. Meanwhile, Iran’s calculation that GCC members may leverage their relationships with Washington in favor of a ceasefire introduces a layer of diplomatic uncertainty that could either hasten de-escalation or prolong confrontation. At this early juncture, it is too early to conclude either way.
Ultimately, the current crisis serves as a stark reminder that military actions in the Middle East carry far-reaching economic and strategic consequences. Beyond the immediate human and political costs, this war is regionalizing and internationalizing in uncontrollable ways, which threaten to unsettle global markets, heighten inflationary pressures, and intensify energy insecurity for nations that rely heavily on supplies from GCC members. How quickly hostilities subside and whether meaningful diplomatic channels can emerge will determine whether this war becomes a brief shock to the system or a protracted disruption with long-lasting global implications.
[1] Rob Geist Pinfold, “Why Iran is dragging the Gulf states into Israel’s war,” The New Arab, March 2, 2026, https://www.newarab.com/analysis/why-iran-dragging-gulf-states-israels-war.
[2] Mahmoud Aslan, “Iran after Khamenei: Will the Islamic Republic survive?” The New Arab, March 2, 2026, https://www.newarab.com/analysis/iran-after-khamenei-will-islamic-republic-survive.
[3] “Iran targets US embassy in Riyadh, as Tehran says Strait of Hormuz ‘closed’,” The New Arab, March 3, 2026, https://www.newarab.com/news/iran-targets-us-embassy-riyadh-says-strait-hormuz-closed.
[4] Gregory Svirnovskiy, Nahal Toosi and Oriana Pawlyk, “US closes several Middle East embassies as it urges Americans to flee region,” POLITICO, March 3, 2026, https://www.politico.com/news/2026/03/03/us-embassies-middle-east-iran-00808416.
[5] Paul Iddon, “Militia Drones And Rockets Bombard Iraqi Kurdistan As Iran War Spreads,” Forbes, March 2, 2026, https://www.forbes.com/sites/pauliddon/2026/03/02/militia-drones-and-rockets-bombard-iraqi-kurdistan-amidst-iran-war/.
[6] Ali Awadah, “Hezbollah’s miscalculation: Is Lebanon facing a new Israeli war?,” The New Arab, March 3, 2026, https://www.newarab.com/analysis/hezbollahs-miscalculation-lebanon-facing-new-israeli-war.
[7] “Iran Update Evening Special Report,” March 2, 2026, ISW, March 2, 2026, https://understandingwar.org/research/middle-east/iran-update-evening-special-report-march-2-2026/.
[8] Rob Geist Pinfold, “Why Iran is dragging the Gulf states into Israel’s war,” The New Arab, March 2, 2026, https://www.newarab.com/analysis/why-iran-dragging-gulf-states-israels-war.
[9] Ben Geman, “Iran attack on giant Saudi refinery pushes up oil prices,” Axios, March 2, 2026, https://www.axios.com/2026/03/02/iran-attack-refinery-prices.
[10] Ibid.
[11] Lina Altawel, “Drone fragments caused limited damage, fire at Ras Tanura oil refinery, Saudi Arabia says,” Anadolu Ajansı, March 2, 2026, https://www.aa.com.tr/en/middle-east/drone-fragments-caused-limited-damage-fire-at-ras-tanura-oil-refinery-saudi-arabia-says/3846318#.
[12] “Gas prices soar as QatarEnergy halts LNG production after Iran attacks,” Al Jazeera, March 2, 2026, https://www.aljazeera.com/news/2026/3/2/qatarenergy-worlds-largest-lng-firm-halts-production-after-iran-attacks.
[13] “Iran vows to attack any ship trying to pass through Strait of Hormuz,” Reuters, March 3, 2026, https://www.reuters.com/world/middle-east/iran-vows-attack-any-ship-trying-pass-through-strait-hormuz-2026-03-02/.
[14] “Energy prices surge as tanker disruptions and facility shutdowns rattle global supply,” AP, March 3, 2026, https://apnews.com/article/oil-prices-iran-us-hormuz-tanker-8a6d6fb35c89d9b0db4c4846f290c2c3.
[15] Janet Loehrke, Ramon Padilla, and George Petras, “You may pay more for gas after Iran closes Strait of Hormuz oil route,” USA Today, March 3, 2026, https://www.usatoday.com/story/graphics/2026/03/03/gas-prices-iran-strait-of-hormuz-map/88959202007/.
[16] “Iran vows to attack any ship trying to pass through Strait of Hormuz,” Reuters, March 3, 2026, https://www.reuters.com/world/middle-east/iran-vows-attack-any-ship-trying-pass-through-strait-hormuz-2026-03-02/.
[17] Janet Loehrke, Ramon Padilla, and George Petras, “You may pay more for gas after Iran closes Strait of Hormuz oil route.”
[18] “Gasoline and diesel prices spike overnight as anxious drivers fill up tanks,” 2News, March 3, 2026, https://www.2news.com/news/national/gasoline-and-diesel-prices-spike-overnight-as-anxious-drivers-fill-up-tanks/article_f5ab9a66-9fa0-5ba1-a661-b9a943ed803f.html.
[19] Ibid.
[20] “Gasoline and diesel prices spike overnight as anxious drivers fill up tanks.”
[21] “OPEC+ agrees modest oil output boost even as US war on Iran disrupts shipments,” Reuters, March 1, 2026, https://www.reuters.com/business/energy/opec-debates-oil-output-boost-us-war-iran-disrupts-shipments-2026-03-01/.
[22] Ashutosh Pandey, “Will Iran war send oil prices above $100 a barrel?,” DW, March 2, 2026, https://www.dw.com/en/iran-war-opec-oil-prices-economic-impact-explained/a-76176495.
[23] Ibid.
[24] Ibid.
