The conflict between Iran and Israel continues to escalate, with the Israeli army vowing that Iran will not go unpunished after an attack [bf910e7d]. The ongoing tension between the two countries has raised concerns about the potential for a wider regional war [14882f2a]. While the focus has been on kinetic warfare, it is important to note that there is also an economic war of attrition between the two countries [3bc807d0].
Iran's economy heavily relies on oil exports, generating over $35 billion in revenue in 2023 [6eff4bbb]. The country has managed to return to 80% of its former oil export volume, partly due to the easing of sanctions under President Joe Biden [6eff4bbb]. However, the ability to sustain a war with Israel depends on whether new Western sanctions can significantly reduce Iranian oil exports [a99c9f0f]. Iran sold an average of 1.56 million barrels of crude oil per day, mostly to China [6eff4bbb].
The article from The New York Times by Karim Sadjadpour provides historical context to the conflict between Iran and Israel [716c1d72]. It highlights that the animosity between the two countries is rooted in ideology, specifically the rise of Ayatollah Ruhollah Khomeini and the 1979 revolution in Iran [716c1d72]. Khomeini's treatise, which became the basis of the constitution of the Islamic Republic, contained antisemitic rhetoric, contributing to the strained relationship between Iran and Israel [716c1d72]. Despite having no bilateral land or resource disputes and a historical affinity dating back over 2,500 years, peace between Iran and Israel remains elusive as long as Iran is ruled by an Islamist government that prioritizes its revolutionary ideology [716c1d72].
The article from The Independent suggests that Iran may be better positioned to deal with sanctions due to its large population, oil resources, and regional alliances [3bc807d0]. However, it also acknowledges that Israel has a strong economy, technological advancements, and support from the United States [3bc807d0]. Iran's GDP in 2022 was $413 billion, lower than Israel's $525 billion, indicating that Iran's economy is not an economic heavyweight contender compared to Israel [6eff4bbb]. The country's GDP growth has been hindered by corruption and lack of transparency, with significant amounts of state income disappearing into opaque government structures [6eff4bbb].
One of the key concerns is the potential impact on crude oil prices. Iran has threatened to block the Hormuz Strait, a crucial shipping route through which over 20.5 million barrels per day of crude oil pass [14882f2a]. If crude oil prices rise above $100 per barrel, it could have a significant impact on the economies of countries, including India, that rely on oil imports [14882f2a].
Iran's strategic location as part of the International North South Transit Corridor (INSTC) is also a concern. Any disruption or instability in Iran could have implications for this corridor and impact trade and connectivity in the region [14882f2a].
The global community has expressed concern about the escalation of tensions between Iran and Israel and has called for restraint and de-escalation [14882f2a]. While some countries have criticized Iran's retaliation, others have urged Israel not to further provoke Iran [14882f2a]. The situation remains volatile, and the outcome of an economic war between Iran and Israel remains uncertain [3bc807d0]. Iran has been cautious in its involvement in the Gaza war, with the attack on Israel being more symbolic than intending to do harm [a99c9f0f] [6eff4bbb].
Iran has been a consistent target of killings and assassinations in the past six months. An Israeli air strike in December 2023 killed Gen Sayyed Razi Mousavi, an adviser to the Iranian Revolutionary Guards. On January 3, 2023, 84 people died in two explosions near the grave of General Qassem Soleimani. Another Israeli air strike in April 2024 killed Gen Mohammad Reza Zahedi, the commander of the Quds force in Lebanon and Syria [a0293599]. Iran is engaged in a proxy war with Israel, and hitting targets inside Iran opens up the possibility of similar retaliations [a0293599].
Iran's geopolitical importance lies in its position on the rim of the 2050 global demographic heartland, which includes South Asia, East Asia, South East Asia, and East Africa [a0293599]. Iran's control of the Strait of Hurmuz allows it to watch over the oil transported from the Persian Gulf to the Indian Ocean and the West Pacific region [a0293599]. The West is nervous about Iran's ideological preference to fight proxy wars and its capability of sea denial in the Indian Ocean [a0293599]. The US and Israel have a desire to put an end to Iran's story, but Iran has not entered into direct conflict with the US [a0293599]. Iran supports the 'Axis of Resistance' against the US and offers military support to Russia and supplies China with oil and gas [a0293599]. The plot thickens as there is no higher authority to prevent Israel from carrying out targeted assassinations and genocide in Gaza [a0293599]. Iran remains a major actor in the plot and retains its capability of waging proxy wars and denying sea control to the US [a0293599] [3bc807d0].
In light of these developments, the looming conflict poses significant consequences for neighboring countries, particularly Pakistan. As highlighted by Qamar Bashir in the Pakistan Observer, Iran faces a strategic trap against Israel and the US, with military capabilities that include ballistic missiles and drones [17ddf9d2]. The US possesses advanced military assets like F-22s, F-35s, and a nuclear arsenal, while Israel boasts advanced air force and missile defense systems [17ddf9d2]. The potential conflict could destabilize Pakistan's security and economy, leading to rising energy prices and an influx of refugees that could strain resources [17ddf9d2]. Pakistan must navigate its foreign relations carefully amidst these regional tensions, and international bodies like the UN and OIC should mediate to prevent war [17ddf9d2].