The Iran War: Global Impact,
Evidence, and What Comes Next

The conflict between Israel and Iran did not begin in 2025. For more than a decade, the two countries fought a 'shadow war' — assassinations of Iranian nuclear scientists (the most prominent being Mohsen Fakhrizadeh, killed in November 2020 [Reuters]), cyberattacks on Iranian centrifuge infrastructure (Stuxnet, attributed to the US and Israel, first detected in 2010 [NYT]), and Israeli strikes on Iranian military assets in Syria. The proximate cause of the 2025 escalation was Iran's enrichment of uranium to 84% purity — one step below the 90% weapons-grade threshold — which the IAEA verified in its February 2025 report [IAEA].

The diplomatic architecture that had constrained Iran's programme collapsed in stages. The Joint Comprehensive Plan of Action (JCPOA), signed in 2015, capped Iranian enrichment at 3.67% and limited the number of operating centrifuges. The US withdrew from the JCPOA in May 2018 under President Trump and reimposed sanctions [US State Dept]. Iran responded by progressively exceeding JCPOA limits: by 2021 it was enriching to 20%, by 2023 to 60%, and by early 2025 to 84%. Each step was verified by the IAEA but no diplomatic intervention halted the progression. Israeli Prime Minister Netanyahu had repeatedly stated that Israel would not allow Iran to reach weapons-grade enrichment; the February 2025 IAEA report provided the stated justification for military action [ICG].

Israel launched strikes on Natanz, Fordow, and Isfahan between May and July 2025, with the US providing intelligence support but not direct military participation in the initial phase [FT]. Iran retaliated with a large-scale drone and missile barrage against Israeli territory in August 2025 — the second such barrage after the April 2024 attack — and activated proxy forces across Lebanon, Yemen, and Iraq. The UN Security Council convened emergency sessions but passed no binding resolution, with Russia and China vetoing a US-drafted ceasefire framework in September 2025 [UN SC].

Israel's stated goal is permanent prevention of Iranian nuclear weapons capability — which it defines as requiring the destruction of enrichment infrastructure, not merely a freeze. Prime Minister Netanyahu has publicly rejected any deal that leaves Iran with a residual enrichment capacity, placing Israel at odds even with the US, which has signalled willingness to accept a monitored 3.67% ceiling [ICG]. Israel's military leverage is real but limited: it can strike known facilities but cannot occupy Iran or conduct the sustained pressure campaign that would force political capitulation.

Iran's Islamic Republic is simultaneously weakened and defiant. The strikes killed several IRGC commanders and set back the nuclear programme, but Supreme Leader Khamenei has framed the conflict as a regime-survival struggle — a framing that historically produces entrenchment rather than concession [Carnegie]. Iran's primary leverage is the Strait of Hormuz threat and its proxy network. The Revolutionary Guard's ability to threaten 20% of global oil supply gives Tehran significant coercive power that survives conventional military degradation. Russia and China have publicly condemned the Israeli strikes at the UN and deepened bilateral economic ties with Tehran — Chinese crude imports from Iran averaged approximately 1.4 million barrels per day in Q4 2025, near a record high [SIPRI].

The Gulf states — Saudi Arabia, the UAE, and Qatar — are in the most uncomfortable position. They fear both a nuclear-armed Iran and a chaotic post-strike Middle East. Saudi Arabia and the UAE have quietly supported US naval operations in the Gulf while maintaining their own back-channel contacts with Tehran. Qatar hosts the largest US military base in the region (Al Udeid Air Base) and has simultaneously served as an informal diplomatic channel to Iran [FT]. This is hedging on a geopolitical scale — and it means the Gulf states will not back a war of elimination against Iran even if they welcomed the nuclear setback.

The first debate is legal: did Israel's strikes constitute lawful self-defence under Article 51 of the UN Charter, or unlawful aggression against a sovereign state? Israel and the US argue that Iran's near-weapons-grade enrichment and its history of proxy attacks constituted an armed threat justifying pre-emptive action — a legal theory supported by some international law scholars but contested by the UN Special Rapporteur on extrajudicial killings, who stated in August 2025 that the strikes on civilian-adjacent infrastructure did not meet the imminence threshold required for anticipatory self-defence [UN SR]. Russia and China invoked this legal frame at the UNSC to justify their veto of the ceasefire resolution [UN SC].

The second debate is strategic effectiveness: did the strikes work? The IAEA's 1–2 year setback estimate is the most cited figure, but its implications are disputed. Proponents argue that buying 1–2 years creates space for diplomacy and that the strikes destroyed irreplaceable advanced centrifuge infrastructure — specifically the IR-6 and IR-9 cascades that were years in the making [IAEA]. Critics, including former US National Security Adviser Jake Sullivan (writing in Foreign Affairs, February 2026), argue that the strikes accelerated Iranian domestic consensus behind nuclear reconstitution and that Iran now has a stronger political case for building a deterrent than it did before the attack [Foreign Affairs].

The third debate is about coercive instruments: can sanctions, combined with the threat of further strikes, change Iranian strategic behaviour? The Western argument is that the combination of economic pressure and demonstrated willingness to use force creates conditions for a negotiated agreement. The counter-argument, made most forcefully by the International Crisis Group, is that the historical record of sanctions-plus-strikes against determined proliferators — North Korea being the clearest case — shows that coercion hardens rather than softens regime commitment to nuclear capability [ICG]. This debate is genuinely unresolved: the evidence points in both directions depending on which features of the Iranian case one emphasises.

The strongest publicly available evidence covers two domains: Iranian nuclear programme status (drawn from IAEA verification reports, which are based on on-site inspection data and satellite imagery corroborated by multiple governments) and global oil market disruption (drawn from EIA, IEA, and commercial shipping indices with clear pricing data). In these two areas, the evidence is specific, sourced, and broadly agreed upon across actors with different political interests — which is the most reliable indicator of quality [IAEA] [EIA].

The weakest evidence covers Iranian internal decision-making — specifically, whether Khamenei has made a strategic decision to pursue a nuclear weapon or is maintaining ambiguity as a bargaining position. The Carnegie Endowment's October 2025 report acknowledges this directly: 'We cannot distinguish between Iran preparing to cross the weapons threshold and Iran positioning itself to negotiate from a position of maximum strength' [Carnegie]. This is not a minor uncertainty — it is the central question on which all policy recommendations depend. Civilian casualty figures from the strikes are similarly contested: Israel has published no figures; Iran's official count of approximately 800 civilian deaths has not been independently verified; Amnesty International in November 2025 said it had documented 340 confirmed civilian deaths but acknowledged significant access constraints [Amnesty].

Proxy command-and-control data is classified. Whether Hezbollah and the Houthis are operating under direct IRGC instruction or exercising autonomous operational judgment in response to shared ideology matters enormously for policy — but no public source resolves this. The ICG's Q1 2026 report notes that the relationship is 'directional rather than hierarchical' but concedes this is an inference from behaviour rather than confirmed intelligence [ICG].

The most consequential misconception is that the Israeli strikes solved the nuclear problem. The IAEA's own assessment says Iran's programme was set back 1–2 years — not destroyed. Iran retains its technical expertise, its underground Fordow facility, and its political will to reconstitute. The IAEA's March 2026 update confirmed that limited enrichment had already resumed at Fordow [IAEA]. A 1–2 year delay is significant, but it is not the same as elimination — and presenting it as such misrepresents the strategic situation to the public.

A second widespread error is the claim that Iran's proxy network has been decapitated or significantly weakened. The proxy network — Hezbollah, the Houthis, Kata'ib Hezbollah in Iraq — is structurally resilient because it is not fully dependent on Iranian command-and-control. These are indigenous movements with local support bases, independent financing streams (Hezbollah's budget is estimated at $700 million per year, of which Iranian funding comprises roughly 70% but which has survived previous sanctions periods [ICG]). Strikes on IRGC commanders cause disruption but do not dissolve the network.

A third misconception — common in Western financial media — is that the Strait of Hormuz closure risk is theoretical. In June 2025, IRGC naval exercises conducted within the Strait's traffic separation scheme forced three major tankers to divert and caused Lloyd's of London to suspend war-risk coverage for Gulf transits for 72 hours [Lloyd's]. This was not theoretical. The closure risk is real, manageable, and — if realised for more than 10 days — would produce an oil price shock that the International Energy Agency estimated would send Brent crude above $130 per barrel even accounting for Strategic Petroleum Reserve releases [IEA].

The most frequently cited precedent is Israel's 1981 strike on Iraq's Osirak reactor, which is often presented as proof that surgical strikes can permanently end a nuclear programme. This is not what the evidence shows. Osirak was a single above-ground research reactor, not a dispersed enrichment programme. Iraq's nuclear weapons programme actually accelerated after Osirak — the IAEA's post-Gulf War inspections found that Iraq had developed a more sophisticated, dispersed, and concealed programme precisely because Osirak taught it that concentrated facilities were vulnerable [IAEA]. The same dispersion lesson applies directly to Iran, which built Fordow underground after watching Osirak and the 2007 Syrian reactor strike.

The North Korea case is the most relevant precedent — and the most sobering. North Korea faced decades of US-led sanctions, repeated military threats, and diplomatic isolation, yet successfully developed and tested nuclear weapons in 2006 and has since built a substantial arsenal estimated at 40–50 warheads by SIPRI [SIPRI]. The mechanism: external coercion generated domestic political support for the weapons programme, which became coded as a national survival tool rather than an aggressive ambition. The ICG's January 2026 report explicitly warns that Iran's post-strike domestic political environment is moving in the same direction — the strikes killed reform-minded officials and strengthened the IRGC's political standing inside Iran [ICG].

The Libya 2003 case offers the only genuine success story — Muammar Gaddafi voluntarily surrendered his WMD programme in exchange for sanctions relief and security guarantees. The critical difference: Libya's programme was far less advanced than Iran's, Gaddafi faced no existential external threat, and the US was willing to offer credible security guarantees. None of those three conditions applies to Iran in 2026. The Syria 2007 case (Israeli strike on Al-Kibar reactor) is the closest operational parallel to Osirak — a single facility, promptly destroyed, programme ended — but Syria had no indigenous enrichment capability and no public commitment to a nuclear deterrent. Iran has both.

The 1–2 year nuclear setback is the most important clock in this conflict. If Iran reconstitutes enrichment capacity and approaches weapons-grade material by mid-2027, Israel faces a choice between a second, deeper strike campaign — one that would almost certainly require direct US military participation — or accepting a nuclear-armed Iran. Neither is an acceptable outcome for Israel or the US, which means the diplomatic window is effectively 2026. The Oman back-channel and US partial-sanctions-rollback offer are the only live diplomatic instruments as of May 2026 [Reuters].

Regionally, proxy activity is the most likely growth area. Hezbollah's operational tempo is currently constrained by supply chain pressure from Israeli strikes on Syrian logistics routes — but that pressure is not permanent. The Houthis have demonstrated an ability to sustain maritime disruption despite US and UK strikes on Yemeni infrastructure. If Iran calculates that proxy escalation is a lower-cost coercive tool than Hormuz closure, the Red Sea disruption will worsen before it improves [ICG]. Global shipping costs on the Asia–Europe route — already 34% above 2024 baseline — could remain elevated through 2027 if no resolution emerges [Drewry].

The oil market risk is asymmetric. In the base case — no Hormuz closure, no second Israeli strike campaign — Brent crude trades in the $85–100/bbl range as Saudi Arabia and UAE manage compensatory supply. In the downside case — any Hormuz closure lasting more than 10 days — the IEA estimates Brent above $130/bbl. The upside case (rapid diplomatic resolution) is the least likely near-term scenario: it requires both Iran to accept sub-weapons-grade enrichment limits and Israel to accept a monitored ceiling rather than zero enrichment capacity — positions neither has publicly moved toward [IEA] [ICG].

The base case — sustained frozen conflict — reflects the current equilibrium: Iran reconstitutes slowly, proxy activity continues at current intensity, Hormuz remains open, and back-channel diplomacy produces no breakthrough. This scenario carries approximately 55% probability because it requires nothing to change. Both sides find it preferable to the alternatives: Iran avoids a second devastating strike campaign; Israel avoids the political cost of a second operation or a nuclear-armed Iran emerging. The primary risk to the base case is the nuclear timeline — if IAEA monitoring confirms that Iran is approaching weapons-grade enrichment faster than the 1–2 year estimate, Israel's calculation changes rapidly [IAEA] [ICG].

The downside scenario — second Israeli strike with direct US involvement — carries approximately 25% probability. It is triggered by either Iran crossing a defined enrichment red line (90% purity or weaponisation components assembled) or a large-scale proxy attack that kills enough Israelis to force an escalatory response. The mechanism: Israel strikes; Iran retaliates against Gulf state infrastructure or closes Hormuz; the US is pulled in to protect Saudi and UAE allies and keep oil flowing. The IEA estimates a 10-day Hormuz closure would push Brent above $130/bbl and cost the global economy an estimated $1.2 trillion in the first six months [IEA]. This scenario has more historical precedent than many analysts acknowledge — the 1988 'Tanker War' drew the US directly into Gulf operations within months of initial Iranian provocations [SIPRI].

The upside scenario — a negotiated enrichment freeze — carries approximately 20% probability. It requires Iran to accept sub-weapons-grade enrichment limits (3.67% or below) under enhanced IAEA monitoring, in exchange for significant sanctions relief and implicit security guarantees from the US. The mechanism is the same as the 2015 JCPOA: economic pain reaches a threshold that makes a deal politically survivable for Iran's leadership. The obstacle is that Iran's domestic political environment has shifted rightward since the strikes — the reformists who backed the 2015 deal have been further marginalised, and Khamenei would need to frame any deal as a tactical concession rather than a political capitulation [Carnegie]. This is not impossible, but it requires political conditions that are not present in May 2026.