In the early morning of June 13th local time, Israel launched a large-scale air strike against Iran codenamed “Power of the Lion”, targeting nuclear facilities, missile factories and military command centers. This operation not only triggered a sudden escalation of the situation in the Middle East, but also drew global attention to the chain reactions of the US-Iran nuclear negotiations, energy security and regional conflicts.
Although Israel claimed that the operation was “self-defense”, US Secretary of State Rubio has clearly stated that “it was not involved in or assisted in this attack”. Trump regards interest rate cuts as a core political achievement, while the conflict in the Middle East may push up oil prices, intensify inflationary pressure and hinder his economic agenda. The United States is withdrawing its troops from Afghanistan and reducing its involvement in the Middle East to avoid being directly involved in new wars. The sixth round of nuclear talks between the United States and Iran was originally scheduled to be held on the 15th. The US side may hope to facilitate an agreement through pressure.
However, the United States has not completely remained aloof. Essential personnel in the Middle East and Africa have been evacuated, and Iran has been warned “not to retaliate against US interests”, suggesting that it may provide intelligence and logistical support to Israel.
Corruption allegations and judicial reform disputes have led to a decline in Netanyahu’s approval rating, and a military victory could consolidate his hawkish image.
Israeli intelligence indicates that Iran’s stockpile of enriched uranium is approaching weapons-grade levels, and the nuclear facility attack is aimed at delaying its research and development process.
With the key positions in the cabinet occupied by hardliners, the resistance to tough foreign policies is relatively small.
The Israeli army claimed that the operation would last for “several days” and has deployed tens of thousands of soldiers in response to retaliation, demonstrating its readiness for a long-term confrontation.
Iran’s Supreme Leader Ayatollah Ali Khamenei vowed “severe punishment”. The Revolutionary Guards launched more than 100 drones in counterattack. Iran may launch local attacks through proxies (such as Hezbollah in Lebanon) to avoid a direct full-scale war with Israel. Iran may accelerate the development of nuclear weapons to balance Israel’s superiority, but it is difficult to achieve a military breakthrough in the short term.
It is worth noting that although Iran has threatened to block the Strait of Hormuz, historical cases show that it prefers to harass oil tankers rather than impose a complete blockade.
Despite the tense situation and the opposition of countries like Saudi Arabia to Iran’s expansion, they are worried that the soaring oil prices will impact the economy and are reluctant to get involved in the war. The Trump administration explicitly opposed large-scale intervention and only provided limited support. Although the Israeli army has the technical advantage, it is difficult for it to deal with Iran and its proxy network unilaterally.
Despite market panic pushing up oil prices, the probability of a complete blockade of the Strait of Hormuz is extremely low (jpmorgan Chase estimates it to be only 7%). The reason is that the right of passage through the strait is subject to the United Nations Convention on the Law of the Sea, and a unilateral blockade would be condemned globally. Eighty percent of Iran’s oil exports rely on this strait. The blockade will deal a heavy blow to its fiscal revenue. Saudi Arabia can transport some of its crude oil through Red Sea ports or by land to alleviate the impact of supply disruptions.
Iran may attack Israel through proxies, and Israel will intensify its air strikes, but the probability of a full-scale war is low. The nuclear talks between the United States and Iran may suffer setbacks. Iran is accelerating its nuclear acquisition process and the regional arms race is escalating. Short-term fluctuations in oil prices are inevitable, but if the strait is not blocked, the increase may be controlled within 100 US dollars per barrel.
The confrontation between Israel and Iran is essentially a game of regional power and global energy security. Although the intensity of the conflict is controllable, its “ripple effect” will continue to impact the geopolitical and economic landscape. Investors need to be vigilant about oil price fluctuations, while policymakers are faced with the difficult choice of balancing deterrence and diplomacy.
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