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The conflict between Iran, Israel, and now the United States has yet to disrupt energy supplies to global markets. However, the US decision to attack Iran's nuclear program...
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In the growing conflict between Israel and Iran, many questions now loom, including the extent of US involvement, the potential for regime change, and the status of Iran’s...
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Insights from the Center on Global Energy Policy
Nephew: We know some things, but other parts of the assessment are still pending, due to the fact that this is an active conflict and Iran has every incentive now to hide the status of its program. Moreover, inspectors from the International Atomic Energy Agency are no longer conducting their duties due to the risk to their safety and Iran blaming them for Israel’s attack.
It is reasonable to conjecture that Fordow has been eliminated as an immediate threat. The massive ordnance penetrators (MOPs) were designed to defeat the protections afforded Fordow by its geography, so assuming they worked as intended, the interior uranium centrifuge halls are likely destroyed. Natanz is built differently and was already badly damaged by Israel’s attack, so we can have very high confidence that it is no longer operational. The cruise missile strikes against Esfahan were described by Chairman of the Joint Chiefs of Staff Dan Caine as targeting “surface” facilities. This is a problem. Iran has built extensive tunnel systems in the mountains around Natanz and Esfahan that are even more difficult to destroy than Fordow, and while the entrances appear now to be covered with dirt, there is no indication that the tunnels were themselves damaged.
Moreover, press reports and open-source imagery suggest that Iran engaged in an extensive effort to move things and personnel from known sites to new, secret facilities. We do not know whether Iran has moved centrifuge components, other important equipment (such as equipment necessary to turn uranium into weapons components), or its enriched uranium stock, but it is likely Iran tried to move everything of value that it could before the anticipated strikes. In fact, Vice President JD Vance and Secretary of State Marco Rubio indicated that they believe Iran’s uranium stock has survived and is intact.
As a result, and despite Trump administration rhetoric, we do not know whether these strikes have “obliterated” Iran’s nuclear program as alleged. Iran was five or six days away from producing its first nuclear weapon’s worth of material when the conflict began. This time may have lengthened, but the uncertainties around Iran’s remaining nuclear program and the possibility that they have clandestine sites capable of fashioning this material into weapons components is real.
Nephew: Iran retains the ability to launch many ballistic missiles, cruise missiles, and drones against US personnel and the countries in which they are located, including Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. Unlike its diminishing stock of medium-range missiles (which are needed to strike Israel), Israel retains a very large stock of shorter-range munitions. Iran also retains the ability to put mines in the Straits of Hormuz, to surge naval assets into the water to interdict or harass ships, and to use terrorist tactics in the region and beyond.
Iran has retaliated in a measured fashion and gave advance warning of its attack to Qatar. Iran was always likely to retaliate targeting US forces rather than the governments hosting them, though there is always the risk of misses. Air defense systems over these facilities are less robust than over Israel and therefore far more vulnerable, especially if Iran retains the ability for a massive launch attack.
Iran may choose to calibrate its response. The United States, in contrast to Israel, was deliberately signaling a smaller set of intentions until Donald Trump’s decision to embrace the notion of regime change on social media. The Iranians may believe that they can respond against the United States in a similar manner as with the 2020 killing of Qasem Soleimani by US forces. In that episode, Iran launched ballistic missiles against US forces in Erbil, Iraq. Although there is still some dispute as to whether Iran aimed to miss, CENTCOM reported at the time multiple injuries, with data eventually emerging indicating about 100 casualties requiring medical evacuation for treatment. At the time, the Trump administration declared that the episode was finished and did not retaliate in turn.
Young: The Gulf Arab states have issued diplomatic statements, with only Oman condemning the US attack on Iran’s nuclear sites. Saudi Arabia issued a statement of “deep concern” and reiterated its position that Iran’s sovereignty should not be violated, as a principle of the Kingdom’s foreign policy. Qatar’s statement “regrets the deterioration” of the regional environment, while it did not acknowledge the attack came from the United States. The UAE statement called for “immediate de-escalation”.
Although the language is relatively muted in diplomatic terms, there is deep worry as the Gulf Cooperation Council states brace themselves for retaliation. Kuwait has opened emergency shelter systems and Bahrain has asked schools and government workers to go remote for this week. Some airlines are canceling flights to Dubai, Doha, and Abu Dhabi.
Just hours before the US attacked Iran, the Houthis in Yemen stated they would resume their attacks on US ships in the Red Sea and retaliate against US action in Iran. In general, the GCC states have continued to voice their fear of being the target of retaliation for US action against Iran. The concern is that it is not possible to execute a limited attack on Iran. The aftereffects could lead to the fall of the regime, but that could take years not weeks, given the experience of Assad in Syria, and the Gulf states (especially Saudi Arabia and the UAE) are focused on their immediate economic priorities, which do not include rebuilding the region or countering an unstable and terror-supporting Iran.
After Iran’s retaliation on Al Udeid in Qatar, the condemnation of GCC states against Iran has been united as a clear violation of international law. More importantly from a Gulf state point of view, this is now in unchartered territory: launching missiles at a neighbor (last done without attribution in 2019 on Aramco facilities in Saudi), especially one that shares your largest asset, the South Pars gas field. Even if communicated in advance, the whole economic transformation of the GCC depends on the idea of stability and prosperity. Iran has punctured the image of a center of global capital, sports and tourism playground, and ecosystem for new technology. Again, the US needs to be extremely careful in how it reads threats in the GCC states. The attack on Al Udeid, even if it caused no casualties and did not target Qatari assets or citizens, won’t be seen the same way within the GCC states. The US administration risks again misunderstanding our partners’ priorities and threat perception, as it did in 2019 in the Abqaiq attacks and in 2022 in the Houthi attacks on Abu Dhabi.
Sternoff: Since the crisis began, Brent crude oil prices have surged 18% (to $77/barrel) and benchmark JKM LNG prices jumped 14% (to $14.3/million British thermal units), but half of those gains evaporated after Iran’s retaliation on Al Udeid. The snap judgment of the oil market is that Iran, due to its weak position, will limit itself to a mostly symbolic reaction and will not obstruct passage in the Strait of Hormuz.
Any Iranian attempt to close the Strait of Hormuz would be highly risky, exposing it to risks of further US attacks that could imperil the regime. Impeding the Strait would affect not only Iran’s own exports—which are principally consumed by China, one of Iran’s few friends—but also those of Saudi Arabia, the UAE, Kuwait, and Qatar. The impacts could be severe, potentially disrupting 20 million barrels per day (b/d) of crude oil and oil products from global markets, along with 20% of global liquified natural gas (LNG) flows.
Regional refineries dependent on crude oil shipments through these waterways could face feedstock shortages, potentially leading to product supply disruptions across Asia, Europe, and North America. Natural gas flows could be severely impacted, with Qatar’s
LNG exports of approximately 77 million metric tons/year (representing about 20% of global LNG supply) potentially unable to reach key markets in Asia and Europe, according to a report by S&P Global.
The Yemeni Houthis have also stated that the United States must “bear the consequences” for its strikes on Iran. Energy transit through Red Sea shipping lanes has already been heavily disrupted over the past two years, but the Houthis could still attempt to target US warships or, in an escalatory spiral, target oil facilities in Saudi Arabia and the UAE.
Young: Saudi Arabia and the UAE have pipelines that can circumvent the strait, but the Saudi East-West pipeline that exits at Yanbu in the Red Sea, and the UAE’s pipeline to the port of Fujairah only have spare capacity to re-route an estimated 2.6 million b/d, or some 15% of the volumes transiting Hormuz. This would effectively leave OPEC+ spare capacity unavailable to the market in the event of a disruption.
Sternoff: Given the stakes, the rise in oil prices has been relatively moderate since the crisis began, and the market has so far correctly judged that it would be suicidal for Iran to attempt to close the Strait, or that the US Navy would move swiftly to secure oil shipping lanes. Should Iran and Washington find a path back to the negotiating table, the remaining geopolitical risk premium in oil prices could swiftly dissipate as the oil market turns back to focusing on downside demand risks from a slower world economy and substantial increases in OPEC+ output in the second half of 2025, as the group finishes unwinding 2.2 million b/d in voluntary oil output cuts.
Israel has not directly targeted Iranian export infrastructure, understanding it could receive diplomatic blowback for any spike in world energy prices. There have been no further attacks on Israeli energy infrastructure after the attack on its largest oil refinery in Haifa last week. Israel currently has very limited refining capacity (its other major refinery at Ashdod is offline for repairs) and is importing oil and refined products, including for jet fuel. Israel could be forced to increase its gasoline imports from 10,000 b/d to roughly 50,000 b/d and add diesel shipments to its ports from 10,000 b/d to 60,000 b/d, S&P Global Commodity Insights analysts estimate. Jet fuel imports could rise from zero to 10,000 b/d.
While oil markets are lowering odds of near-term supply risks, an extended crisis can have important effects on Iranian oil production. Iran may elect to hunker down, avoiding both diplomatic engagement and further escalation, while attempting to bleed Israel in a war of attrition and reconstitute its nuclear and missile programs. In that scenario, either the United States or Israel may move, through sanctions or infrastructure attacks, to squeeze Iran’s oil revenues via intensified oil sanctions or sabotage of its oil export infrastructure.
Furthermore, domestic political instability in Iran could have meaningful impacts on Iranian oil and gas production. Periods of upheaval in important oil producers, including Iran (1979 Revolution), the Soviet Union (post-1989), Iraq (1991 Gulf War), Venezuela (2002 coup), and Libya (2011 civil war) have caused major disruptions to oil output. While every one of those cases had its own dynamics, oil production remained below pre-crisis levels for years or even decades.
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