The war involving Iran escalated sharply this week, with strikes on critical energy infrastructure spilling across borders, a tightening chokehold on the Strait of Hormuz, and a public rift between the United States and its Western allies over how to respond.
A key flashpoint was an Israeli air strike on Iran’s South Pars gas field and nearby facilities, carried out with United States coordination according to officials. South Pars, the world’s largest gas field shared geologically with Qatar’s North Dome, accounts for roughly 70 per cent of Iran’s gas production and fuels much of the country’s electricity generation and industry. The attack damaged pipelines and processing units, prompted Tehran to halt gas exports to Iraq, and contributed to spikes in regional energy prices. Iranian leaders condemned the strike as a dangerous escalation, and Iranian President Masoud Pezeshkian warned it could have “uncontrollable consequences” that might “engulf the entire world.”
The South Pars strike has intensified regional tensions. Following Iranian missile fire that caused “extensive damage” to Qatar’s main gas facility at Ras Laffan, Doha ordered Iranian security and military attaches to leave the country: a rare diplomatic rupture between neighbors. The United Arab Emirates also shut down the Habshan gas facilities in Abu Dhabi after an Iranian attack, and Saudi Arabia said two of its refineries were hit, with Riyadh declaring that “the little trust that remained in Iran has been completely shattered.” Gulf governments temporarily evacuated non essential staff from major oil and gas hubs with fears of further reprisals.
On Thursday morning, Iran attacked an oil refinery in Saudi Arabia, with Reuters reporting that the strikes hit a Saudi Aramco oil rig in the Red Sea port of Yanbu, though the damage was minimal. The United Kingdom’s Merchant Marine Operations also reported that an “unknown projectile” hit a tanker off the coast of Qatar. The projectile caused a fire on the tanker, but no one was injured.
Iran this week tightened its control over the Strait of Hormuz, a narrow maritime corridor through which about one fifth of global oil and liquefied natural gas normally passes. Revolutionary Guard officials have issued warnings to commercial shipping and emphasized that passage cannot be guaranteed, even though some vessels continue to transit the waterway. Insurers have sharply raised premiums for vessels in the strait, effectively constraining traffic.
There have been reports that Tehran may condition safe passage on economic terms, such as by requiring cargoes to be traded in Chinese yuan rather than US dollars. Such a move, if implemented, could have longer-term implications for global energy markets and financial systems, though details remain uncertain. Oil and gas prices have already surged, with Brent crude around US$110 a barrel as markets express concern over further disruption.
US President Donald Trump has called on other nations to help secure the strait and reopen it to commercial shipping, warning that continued disruption could harm global stability. “We need freedom of navigation, and we need it soon,” he said in public remarks this weekend, urging allies to contribute naval assets to a protective mission.
That appeal has met with resistance from Western governments. Major NATO members, including Germany and Italy, have ruled out deploying warships, with Germany’s defense minister saying “this is not our war” and stressing a preference for diplomatic solutions. Britain, while expressing concern about energy markets, has also been cautious about committing forces to a broader conflict, highlighting the risks of escalation and the “lessons learned from the Iraq war.” Other countries, including Japan and Australia, have likewise declined naval participation, though some have offered surveillance or logistical support.
As the conflict has spread beyond military targets, the human toll on civilian life has become increasingly visible. The World Health Organization reports that more than 1,300 people have been killed in Iran and over 7,000 injured, with confirmed strikes on hospitals, prompting at least six facilities to be evacuated and stretching local health services. Residential buildings, schools and other non military infrastructure have also been damaged in urban areas, contributing to power and service disruptions that affect everyday life. Civilians in Gulf countries have felt the impact too: Iranian missiles and drones have caused deaths and injuries in the United Arab Emirates, Kuwait and elsewhere, often from shrapnel or debris falling into populated districts, while road networks, ports and electricity grids have been disrupted, limiting transport and access to basic goods.
The cost of the war is also significant. US defense analysts estimate the conflict cost the United States around $3.7 billion in the first 100 hours of operations, with daily operational costs near $890 million for air and naval sorties, missile use and troop deployments. These figures do not capture the larger economic impacts from disrupted energy supplies, damaged infrastructure and rising regional security spending.
In an unusual twist, the United States and some Gulf states are turning to Ukrainian expertise to cope with a wave of Iranian designed drone attacks. Ukrainian President Volodymyr Zelensky has said that around 200 Ukrainian military experts are in the Gulf region helping allies counter Iranian drone threats, drawing on combat experience from Ukraine’s long war with Russia.
For countries in the South Caucasus, the ongoing developments carry clear consequences. Economies remain closely tied to global energy markets and to export routes that could serve as alternatives if Gulf supplies remain constrained. Any prolonged disruption of flows through Hormuz threatens to push prices higher and shift demand toward Caspian exporters such as Azerbaijan, while also increasing pressure on transit nations like Georgia to manage rising traffic and security risks.
By Team GT
