Israel, Iran

What:

Hours after launching over 300 drones and missiles in retaliation for an alleged Israeli attack on the Iranian consulate in Damascus, the capital of Syria, killing seven officers, Iran’s mission to the United Nations declared that “the matter can be deemed concluded.” However, considering the conflict between Iran and Israel is over can be misleading.

Why:

With the direct attack on Israel, Iran has crossed a significant threshold, as both countries had previously refrained from direct military confrontation despite Iran’s backing of prolonged proxy conflicts in Israel’s vicinity, notably in Syria, Lebanon, and Yemen. In these regions, Iran supports militant groups such as Hezbollah and the Houthis, which have engaged in armed conflict with Israel.

So What:

• It is less probable for Israel to retaliate against Iran directly, primarily because the Iranian strike did not cause significant harm, and further, US President Biden cautioned Israeli Prime Minister Benjamin Netanyahu that the US would not participate in any counter-offensive against Iran.
• However, given Netanyahu’s recent public scrutiny over his handling of the October 7th Hamas attack and subsequent kidnappings, he may feel compelled to respond to the unprecedented Iranian strike. He could pursue alternative measures to penalize Iran, such as attacks on Iran-backed militants in Syria and Lebanon or strategic strikes on Iran’s military installations.
• Flights between Europe and Asia could see significant delays and longer journey times.
• Oil prices have not moved much following Iran’s attack on Israel mainly because the attack didn’t cause as much damage as expected. This has calmed worries about a fast-growing conflict that might disrupt oil supplies.
• Escalating tensions have raised concerns in the global maritime industry over supply chain disruptions and potential shipping route blockages. The looming possibility of a Persian Gulf shutdown could significantly impact shipping costs and trade dynamics worldwide.

Outlook:

Reports have indicated Israel’s intention to retaliate against Iran; however, the war cabinet remains undecided on the magnitude and timing of such a response. Iran’s direct bassault on Israel has shifted the relationship dynamics between the two countries. With the possibility of escalating tensions, the likelihood of direct confrontations in the future becomes more conceivable, heightening apprehensions about the potential outbreak of a full-fledged conflict.