Since late February 2026, Iran has been in a state of open war with the United States and Israel, which escalated into a regional conflict encompassing the Persian Gulf, the Levant, and the eastern Mediterranean. Between March 23 and the announcement of a two-week ceasefire on April 8, 2026, there were further large-scale strikes on Iranian infrastructure, an intensification of Iranian retaliatory attacks on the energy facilities of the Gulf states and Israel, and an unprecedented shipping crisis in the Strait of Hormuz. The ceasefire – negotiated with Pakistan playing a key mediating role – halted open hostilities, reopened the Strait of Hormuz, and created a framework for U.S.-Iran talks, but it did not end regional tensions or the Israeli-Lebanese war.
The bulk carrier M/R Mayuree Naree after being attacked by Iran / Photo: X
Economically, the conflict triggered the largest supply shock in the oil and gas market in decades, causing a sharp rise in fuel prices, inflationary pressure, and a slowdown in economic activity worldwide. For Iran itself, massive bombardment, the blockade of the Strait of Hormuz, strikes on the petrochemical sector, and sanctions mean a GDP contraction estimated at more than 10% and a further weakening of an already structurally fragile economy. Politically, the war accelerated the evolution of Iran’s “Axis of Resistance” strategy toward the parallel use of proxy networks and direct confrontation, while also deepening Iran’s dependence on partners outside the West and increasing internal pressure on the regime following the elimination of Supreme Leader Ali Khamenei.
By March 23, the conflict had already been going on for nearly four weeks, evolving from a series of retaliatory strikes into a full-scale air and missile campaign on both sides. At that time, Iran still controlled transit through the Strait of Hormuz, while the United States and Israel were focused on further degrading Iran’s military and energy capabilities, including petrochemical and energy infrastructure. March 23 marks a turning point, because in the days that followed Washington began actively seeking mediation channels through Pakistan and other countries in the region, while at the same time increasing the level of military threats directed at Iran.
The U.S. and Israeli Campaign Against Iran
In the last week of March and early April 2026, the combined U.S.-Israeli campaign focused on further “decapitating” command structures and degrading Iran’s military potential. According to an analysis by the Institute for the Study of War, the killing of a number of key field commanders significantly reduced Iran’s ability to conduct coordinated, large-scale missile attacks, forcing it to resort to smaller salvos and lowering the pace of strikes on Israel. At the same time, Israel struck Iran’s two largest petrochemical facilities – including the South Pars complex – which account for about 85% of Iranian petrochemical exports, a move with both military significance (the production of explosives) and economic impact.
The campaign also included strikes on maritime infrastructure and on a naval base of the Islamic Revolutionary Guard Corps. Israel also announced the killing of key naval commander Alireza Tangsiri, whom it blamed for the blockade of Hormuz. In the western Kurdish provinces, attacks targeted border guard forces and internal security structures, while reports of possible infiltration by Israeli special forces in the vicinity of nuclear facilities pointed to an escalation toward a destabilization campaign.
Iranian Actions and the “Axis of Resistance”
In response, Iran continued its missile and drone attacks on Israel and on U.S. bases in the region, although their intensity and scale declined as a result of the loss of commanders and infrastructure. At the same time, Tehran used its allies in the so-called Axis of Resistance – Hezbollah in Lebanon, the Houthis in Yemen, and Shiite groups in Iraq – to carry out coordinated attacks, as illustrated by the simultaneous barrage against Israel on April 6 by Iran, Hezbollah, and the Houthis. This tactic supports the view that the 2026 war did not replace proxy warfare with a traditional interstate conflict, but rather evolved into a “hybrid” model combining intensive state-on-state strikes with the continued activity of proxy networks.
An important instrument of Iranian pressure was its control over the Strait of Hormuz: Tehran restricted or prevented the transit of tankers, especially those linked to the United States, Israel, and their allies, using both direct threats and the requirement to deal with intermediaries connected to the Revolutionary Guard. In addition, Iran carried out strikes on the energy infrastructure of the Gulf states, including the world’s largest LNG terminal at Ras Laffan in Qatar, reducing Qatar’s export capacity by around 17% and deepening the global energy crisis.
The Diplomatic Process
From March 23 to 25, the United States, through Pakistan, conveyed a fifteen-point framework proposal that included demands for the dismantling of Iran’s nuclear program, the handover of its enriched uranium stockpiles, limits on its missile capabilities, an end to support for the Axis of Resistance, and guarantees of freedom of navigation through the Strait of Hormuz. At the same time, President Donald Trump threatened further massive strikes on Iran’s energy infrastructure and bridges if Tehran did not accept the agreement within a short timeframe. Iran formally rejected these terms, sending a letter to the International Maritime Organization in which it offered “safe transit” only to “non-hostile” vessels, while denying security guarantees to ships linked to the United States, Israel, and the “participants in the aggression.”
In the following days, Iran presented its own conditions for ending the war, making any agreement contingent on also covering other theaters of operations – in particular Lebanon and Yemen – which in effect would have linked a ceasefire in Iran to the end of the war between Israel and Hezbollah. This strategy of broadening the negotiating agenda reflected Tehran’s effort to tie its own security to the future of the entire Axis of Resistance in the region.
The Hormuz Ultimatum
In late March and early April, President Donald Trump repeatedly threatened strikes on Iranian power plants and other key installations if Iran did not reopen the Strait of Hormuz within 48 hours, driving oil prices sharply above USD 110 per barrel. At the same time, Israel and the United States continued attacks on Iranian energy infrastructure, while Iran responded with strikes on ports, refineries, and desalination facilities in the GCC states, raising growing concerns about prolonged destabilization across the Gulf as a whole.
International institutions – the IMF, the IEA, and the World Bank – warned that a prolonged war and blockade of Hormuz would trigger the largest oil and LNG market shock in history, significantly increasing inflation and weakening economic growth, especially in energy-importing countries. In this context, the G7 countries declared their readiness to take all necessary measures to stabilize the energy market, including the release of strategic reserves.
Pakistan’s Role and the Final Agreement
Pakistan, which by the end of March had become the main communication channel between Washington and Tehran, presented a revised two-phase ceasefire proposal on April 5, providing for an immediate halt to hostilities and the reopening of Hormuz, followed by a 15- to 20-day period of negotiations on a permanent agreement. On April 6, Iran formally rejected that version, but continued behind-the-scenes talks, using the threat of further escalation and the complete closure of the strait as leverage. On April 8, it was announced that the United States, Iran, and Israel had accepted a two-week ceasefire, which was to enter into force immediately and make it possible to begin talks in Islamabad.
According to media reports, the Iranians portrayed the agreement as their own diplomatic victory, claiming that Washington had accepted a ten-point plan including, among other things, the lifting of sanctions, the withdrawal of U.S. troops from the region, recognition of Iran’s right to enrich uranium, and compensation for the damage. At the same time, UN Secretary-General António Guterres and the major powers called for strict observance of the ceasefire and for it to be used as an opportunity to work out a lasting solution.
The Ceasefire
The two-week ceasefire provides for the immediate suspension of all military operations between the United States and Iran (in practice also covering Israeli actions against Iran), the full and safe reopening of the Strait of Hormuz to commercial shipping, and the start of peace talks in Islamabad with Pakistan acting as mediator. The United States committed to suspending strikes on Iranian territory, declaring that all its main military objectives had been achieved, while Iran committed to halting attacks on U.S. and Israeli bases and to allowing the controlled passage of vessels through Hormuz with the participation of its own armed forces.
In the first hours after the ceasefire was announced, fuel markets showed clear signs of relief – oil prices fell by about 15%, from around 120 USD to about 95 USD per barrel, although they remained well above pre-war levels. At the same time, missile alert sirens were activated in some Gulf states, including Bahrain, and reports indicated isolated launches of missiles by both sides. Even so, on the first full day of the ceasefire, the United States for the first time in more than five weeks did not carry out large-scale attacks on Iran, and Iran refrained from striking U.S. targets, although it continued to exert pressure through the way it managed traffic in Hormuz.
The Impact of the War on Iran’s Domestic Situation
On the Iranian side, the war brought unprecedented losses among the political and military elite, including the killing of Supreme Leader Ali Khamenei and many senior Revolutionary Guard commanders in the initial phase of the campaign. Strikes on key state institutions – the leadership compound, the president’s office, the Expediency Discernment Council, and the Assembly of Experts – weakened the regime’s ability to manage the crisis effectively and forced the emergence of new power configurations within the establishment. According to various analyses, in the short term this led to a consolidation of power in the hands of hardline factions linked to the security apparatus, which favored continuing a confrontational course toward the United States and Israel.
At the same time, the war increased the importance of the decision-making structure centered on the Supreme National Security Council and the Islamic Revolutionary Guard Corps, marginalizing the more pragmatic factions that had previously pushed for a resumption of talks on the JCPOA. The need to manage multiple parallel fronts – from the direct defense of the territory to coordination of the Axis of Resistance’s activities – has placed a heavy burden on the security apparatus, although so far it has not led to a lasting collapse of control over society.
The Iranian Economy Under Pressure
Estimates based on analogies with earlier conflicts indicate that Iran’s GDP could contract by more than 10%, given the scale of infrastructure destruction, sanctions, and the blockade of Hormuz. Bombing of petrochemical, gas, and oil facilities – including South Pars and associated refineries – drastically reduced Iran’s export capacity, while the blockade of Hormuz for several weeks almost completely halted the legal export of oil and LNG. In addition, the loss of a significant portion of energy and industrial infrastructure means that reconstruction will take years, with only limited access to external financing.
The closure of airspace and disruptions to land and maritime traffic hindered the functioning of trade and humanitarian organizations, particularly affecting Iran’s large migrant population, including about 4.4 million Afghans and several hundred thousand Iraqis. Inflation, along with shortages of fuel and electricity, increased social pressure, although the lack of reliable domestic data makes it difficult to assess the scale of protests or open dissent.
Regional Consequences
The Persian Gulf and the GCC States
The war led to the unprecedented involvement of the entire Gulf Cooperation Council (GCC) in the conflict, as Iran, for the first time in history, attacked all the states in the bloc – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE – striking energy infrastructure, airports, and civilian neighborhoods. These attacks, combined with the blockade of Hormuz, forced Gulf oil producers to cut output because of limited storage capacity and undermined the existing security model based on the indirect projection of U.S. power.
In the GCC states, concerns grew over the stability of economies dependent on energy revenues, global mobility, and migrant labor. This was reflected in analyses of changing citizen behavior, fiscal pressure, and the possible shift from a welfare-state model toward greater civic engagement. At the same time, the growing threat to water desalination infrastructure and logistics hubs endangered the food and economic security of the entire Gulf.
The Levant and the Lebanese Front
The conflict with Iran intensified Israel’s war with Hezbollah, which in the spring of 2026 turned into a full-scale air and missile campaign in Lebanon and Syria. Israeli airstrikes on southern Lebanon, the Beqaa Valley, and the suburbs of Beirut triggered mass displacement of the population to the capital and the Mount Lebanon region, reaching a scale comparable to the crisis of October 2024. Despite the ceasefire between the United States, Israel, and Iran, Israeli attacks on Lebanon continued, and experts warned that Israel’s lack of restraint could undermine the durability of the ceasefire with Iran.
For Iran, the Lebanese front remains a key element of its deterrence strategy vis-à-vis Israel, and the demand that Lebanon be included in any future peace agreement indicates that Tehran views Hezbollah as an integral part of its own security system. At the same time, the prolonged war in Lebanon is increasing the political and humanitarian costs across the region, while also weakening the Syrian regime’s ability to stabilize the territories it controls.
Immediately after the announcement of the two-week U.S.-Iran ceasefire, however, Israel carried out some of the largest airstrikes on Lebanon since the start of the war, clearly signaling that the agreement did not cover its actions against Hezbollah. Without warning, the Israeli Air Force struck densely built-up commercial and residential districts in Beirut, as well as targets in the Beqaa Valley and southern Lebanon. More than 100 military and command targets were attacked within minutes, resulting in hundreds killed and wounded and triggering another wave of displacement. From Lebanon’s perspective, the U.S.-Iran ceasefire paradoxically increased the intensity of Israeli fire, because Israel was able to concentrate its forces on the northern front.
Israel has publicly stressed that the two-week agreement applies only to the direct war with Iran, not to the campaign against Hezbollah, and has announced further strikes with force, precision, and determination. Meanwhile, Hezbollah – which briefly suspended its attacks as part of the declared ceasefire – resumed rocket fire on northern Israel, presenting it as a response to Israeli violations of the ceasefire and demanding that Lebanon be explicitly included in the agreement. The UN and some European states have warned that continued Israeli airstrikes on Lebanon – especially in densely populated areas – could lead to the collapse of the U.S.-Iran ceasefire and renewed regional escalation.
The Security of Iran’s Neighbors and NATO
As a result of the war, ballistic missiles launched from Iran were intercepted by NATO’s integrated air defense system upon entering Turkish airspace, leading to a missile explosion in Hatay Province and prompting a sharp reaction from Ankara. NATO’s Secretary General assured that the Alliance was ready to defend Turkey, underscoring the risk of secondary escalation of the conflict toward direct confrontation between Iran and NATO. The United States evacuated non-combat personnel from Cyprus and warned of the risk of further Iranian attacks in the eastern Mediterranean area.
For Iraq, Afghanistan, and Iran’s other neighbors, the closure of airspace and disruptions to air traffic meant serious obstacles to humanitarian operations, evacuations, and migration, alongside the risk of rising social tensions associated with refugee inflows or outflows. At the level of the broader security architecture, the conflict accelerated a process of regional fragmentation, in which states are being forced to define themselves clearly in relation to the U.S.-Israel axis or the Iran-proxy axis, making it more difficult to pursue a traditional balancing policy.
Global Economic and Energy Consequences
The closure or severe restriction of traffic through the Strait of Hormuz – through which 20–30% of global oil exports and a significant share of LNG pass – caused the largest supply shock in the history of the oil and gas markets. In the first month of the conflict, the volume of global oil flows was reduced by about 11 million barrels per day, which – even after accounting for intervention measures – still left a supply gap of roughly 9 million barrels relative to pre-war demand. Oil prices exceeded USD 110 per barrel and remained near four-year highs, while some analysts considered a scenario in which prices could rise to USD 200 if the closure of Hormuz were prolonged.
The surge in oil and gas prices led to a sharp increase in fuel costs, shortages, and rationing in many countries across Asia, Africa, and Latin America, as well as a collapse in stock market valuations and capital outflows from emerging markets. After the ceasefire was announced and the reopening of Hormuz was signaled, oil prices fell by more than a dozen percent, but remained significantly higher than before the conflict, and experts warned that restoring normal flows and infrastructure would take weeks or months.
Macroeconomic consequences for the world
The International Monetary Fund assessed that the war in Iran was a global but asymmetric shock that worsened the growth outlook for many economies and led to tighter financing conditions. Business surveys in the United States, the euro area, the United Kingdom, and Japan pointed to declines in PMI indices and rising inflation expectations. Economists warned of the risk of a scenario resembling stagflation, while emphasizing that it was still too early for definitive conclusions. Developing countries with high energy import dependence were forced to ration fuel and subsidize costs for the poorest, increasing fiscal burdens and the risk of debt crises.
On the other hand, the Gulf economies’ share of global GDP (2–3%) means that even a deep decline in production in the region has only a limited direct impact on global growth — the key effects are the secondary consequences for energy prices, inflation, and investor confidence. The conflict prompted many countries to accelerate discussions on energy security and diversification of the energy mix, which in the medium term may support investment in renewable energy sources, although in the short term some governments also increased the use of coal and other fossil fuels.
Consequences for the international order and U.S. policy
The war, and its temporary freezing through the ceasefire, demonstrated the limitations of a strategy based on maximum pressure and attempts to force Iran into far-reaching concessions within a short period of time. Despite major military successes by the United States and Israel – including the serious degradation of Iran’s missile and nuclear capabilities – Tehran retained the ability to inflict major damage on regional economies through attacks on energy infrastructure and control over maritime routes. In practice, this forced Washington to seek a compromise. The long-running dispute over the nuclear program and the JCPOA is entering a new phase in which Western capitals must take into account the systemic risk to energy markets and macroeconomic stability.
For the United States, the war in Iran is another test of its ability to manage simultaneous crises, alongside the effects of the war in Ukraine and global trade tensions, while maintaining the credibility of its security guarantees to allies in the region without becoming trapped in prolonged and costly interventions. The ceasefire negotiated with Pakistan’s involvement points to the growing role of middle powers as mediators, as well as to the increasing multipolarity of the international order, in which the United States must cooperate with countries outside the traditional circle of Western allies.
Prospects After the Ceasefire
The limited time horizon of the ceasefire and its conditional nature mean that the future of the conflict remains uncertain. If the talks in Islamabad fail, the parties may return to hostilities, although probably with greater caution regarding escalation in the energy sphere. For Iran, the priority will be to use the ceasefire to partially rebuild its military capabilities, restructure the ruling elite after Khamenei’s death, and strengthen domestic legitimacy through a narrative of victory over the United States. The United States and its partners, in turn, will seek to maintain sanctions pressure while hoping for limited de-escalation and the gradual restoration of stability in energy markets.
Regardless of the final shape of any agreement, the 2026 war will likely permanently reinforce the perception of the Strait of Hormuz as a strategic chokepoint for the global economy and accelerate the diversification of commodity supply routes and energy sources. For the regional order, this means the entrenchment of a hybrid model of conflict in which proxy wars and direct clashes between states intertwine, and in which Iran, despite serious losses, remains a key – though weakened – pole of the Middle East security system.
See also:
- Update on the Situation in the Islamic Republic of Iran
- Update on the Situation in the Islamic Republic of Iran: January 26–February 10, 2026
- Situation Update in the Islamic Republic of Iran – Status as of January 26, 2026
- The Situation in Iran, 2025–2026: An Analysis
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