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The US-Israeli attack on Iran and Iran's retaliatory strikes against energy infrastructure directly impact China.
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On February 28, the United States and Israel launched a campaign against Iran targeting military infrastructure and the regime's core leadership. Supreme Leader Ayatollah Ali Khamenei and several...
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The Center on Global Energy Policy at Columbia University SIPA is closely following the escalating conflict in Iran and its implications for US national security, Middle East geopolitics, and global energy markets. See all of our coverage here.
On February 28, the United States and Israel launched new attacks on Iran targeting primarily the country’s leadership, security forces, and missile program. Beginning in the early daylight hours, during Ramadan and Shabbat, the attacks caught Iran’s defense establishment off guard and resulted in the death of Supreme Leader Ali Hosseini Khamenei and a cadre of senior officials in the initial attack. But while the US and Israeli operation has demonstrated considerable tactical and operational skill, its strategic objective remains obscure. As the US and Israel continue to strike targets across Iran, Tehran has retaliated with attacks on nearby US military bases and regional allies, with notable disruption to regional energy infrastructure. It remains unclear how the crisis will evolve or be resolved, but what seems more certain is that it will have lasting geopolitical and energy implications.
In this Q&A, CGEP scholars Richard Nephew, Karen E. Young, Daniel Sternoff, and Anne-Sophie Corbeau offer an initial analysis of core issues raised by the attacks, particularly regarding global energy.
Nephew: Frustrating as it is, no one knows, partly because neither the United States nor Israel has provided a clear and consistent strategic objective. In a recorded address released shortly after the first missiles struck Iran, President Donald Trump invoked Iran’s nuclear program, its missile capabilities, and its repression of protesters earlier this year. But subsequent US and Israeli messages have varied in their description of the objectives of the attacks. While Trump called on Iran’s population to rise up against the Islamic Republic, strongly implying regime change was the real goal, he has also indicated a willingness to cut a deal with remaining elements of the Iranian government. Chairman of the Joint Chiefs of Staff Dan Caine said on March 2 that “the objectives are to eliminate Iran’s ability to project power beyond its borders, eliminate its missile capabilities, and destroy its Navy.”
Despite Khamenei’s death, the Iranian state still seems intact: President Masoud Pezeshkian is alive as of this writing and, together with the remaining leadership, has formed a temporary leadership council to govern Iran during the transition to a new Supreme Leader. If Trump is prepared to talk with the Iranian government, then he’ll be dealing with this council—suggesting he’s not conditioning an end to hostilities on regime change beyond the need for a successor to Khamenei.
As for whether a deal could be struck, an eventual ceasefire is probable as Iran, the United States, and Israel all exhaust their stockpiles of munitions and, in the case of the latter two, missile defense interceptors. But it will likely take time to unfold since the United States and Israel have a lengthy list of targets in Iran and the Iranians have shown no signs of abandoning their retaliation. A more durable agreement on major issues like the nuclear or missile programs is unlikely. An Israeli source alleged that the date of the operation was set weeks ago, suggesting that the entire negotiations process over the last month was a ruse—a claim that was also made about the negotiations preceding the twelve-day war in June. Even if this is not true, there are already enough complications in the negotiations to make a deal difficult to envision.
Nephew: Unlike with Venezuela, the Iranian government is prepared to continue the fight. In fact, it is notable that Khamenei died in the first blows from the United States and Israel. So, all of Iran’s retaliatory strikes have taken place after his death. This strongly suggests that Iran’s government has no intention of folding with Khamenei’s end.
Iran has demonstrated a willingness to expand the war through its targeting of Gulf Arab and fixed energy assets such as Ras Tanura (Saudi Arabia) and Ras Laffan (Qatar). Any halt to this activity will likely be tied to an Iranian effort to get Gulf Arab states and outside actors (like China) to pressure the United States to end hostilities. Although no one wants to see energy flows interrupted (including Iran, which is dependent on the associated revenue), the tacit bargain against targeting these assets appears to be breaking down. Likewise, with the expansion of the conflict into Lebanon following Hezbollah’s attacks on Haifa on March 1, it seems most likely that Iran is committed to creating enough chaos and threat that the United States and Israel stop their attacks.
Young: All six of the Gulf Cooperation Council (GCC) states are under direct attack from Iran. Iranian officials have said they are targeting US bases, but the attacks (or their falling debris) have hit energy infrastructure, a data center, airports, ports, hotels, and civilian apartment buildings. In the United Arab Emirates (UAE), three people were killed and airports were attacked. In Bahrain, Iranian barrages have targeted US and British bases as well as residential buildings. In Kuwait, a US base was targeted. Across the GCC, Iraq, and Jordan, injuries and damage have mostly been due to falling debris from intercepted missiles, though drone attacks have been frequent, especially in the UAE where the government reported that 506 of 541 Iranian drones on its territory had been intercepted as of early Sunday, March 1.
If the goal of these attacks was to move the GCC states to push the US and Israel to conclude their attacks on Iran, the opposite has occurred. As in June 2025, the GCC states share a sense of collective anger and distrust of Iran. There have been no counter-attacks yet against Iran from any of the Gulf states, but there is a growing frustration that Iran has abused mediation efforts—especially by Oman—and is purposefully regionalizing the conflict by threatening the security and economic vitality of the entire Gulf.
DP World reportedly suspended operations at the Jebel Ali port in Dubai temporarily as a precautionary measure. Traffic in the Strait of Hormuz is not blocked, but it is severely limited and slowed, raising questions about both the volume of energy exports as well as imports of food and necessities to the Gulf states. Bourse and Bazaar, a regional consultancy, estimates that within twenty days, fresh fruits, fish, dairy, beef, and other food items will be in shortage if maritime capacity in the Strait of Hormuz drops by 50 percent and air freight imports are unavailable. Shipping in the Red Sea corridor is also at risk, causing Danish shipping company Maersk to pause trips through the Bab Al Mandeb strait temporarily. The Iran-aligned Yemeni Houthis threatened to start attacks on Saturday night, but have not yet engaged, instead encouraging their supporters to hold mass rallies in the capital Sanaa in support of Iran. Aviation, logistics, and tourism are critical economic drivers across the GCC, and the current attacks have both disrupted trade, air, and maritime traffic and threatened citizens and non-citizens alike, with foreigners accounting for all casualties so far.
Gulf regional stock markets have been mixed, with the Boursa Kuwait suspended on Sunday and equity markets closed in the UAE and Qatar. In Saudi Arabia, the Tadawul fell Sunday by nearly 5 percent before paring losses (though Aramco shares gained 3.7 percent), with declines also in Oman and Bahrain. These losses seem relatively modest given the unprecedented nature of Iran’s simultaneous attacks on the GCC states.
Two lingering questions are how long the Iranian retaliations will continue and whether the Gulf states will join the war in an offensive capacity. That uncertainty will be destabilizing, as foreign direct investment may delay allocations, and non-oil economic activity, including tourism, may decline sharply. Even if oil prices spike only briefly, the economic impacts will pose sustained challenges to diversification and the ecosystem of multinational, multicultural population centers. The region will want to portray these attacks as limited shocks, but the newly formed provisional government in Iran gives no illusion of moderation.
Sternoff: Brent crude oil prices jumped $10/bbl to just below $80/bbl on the first trading day since the war erupted, up almost $20/bbl since Iranian protests intensified in late January. At the time of writing, there are widespread disruptions to energy transit through the Strait of Hormuz. A handful of oil tankers have been attacked, carriers are suspending shipments, risk insurance underwriters are canceling coverage, and freight rates are skyrocketing. Whether the price gains are sustained or extended depends heavily on the conflict’s path and duration, and on the extent of any actual disruptions to physical supplies.
The conflict is widening to energy infrastructure, and substantial damage to critical production and export facilities would have longer-lasting fundamental impacts. At the time of writing, the most prominent piece of oil infrastructure to be struck is Saudi Arabia’s 550,000 b/d Ras Tanura refinery. There are no reports of attacks on upstream facilities, though there have been precautionary shutdowns of small fields in northern Iraq. In 2019, Iran targeted Saudi Arabia’s irreplaceable Abqaiq oil processing and export hub; damage there would create an extended disruption to oil markets. With Tehran targeting energy infrastructure, there is a high risk that Iran’s key export facilities at Kharg Island will be struck.
The Strait of Hormuz is an irreplaceable chokepoint for nearly 15 million barrels per day (mb/d) of crude and condensate and over 4 mb/d of oil products, and there will be significant impacts on world oil balances if current disruptions last more than several days. These figures include between 1.3 and 1.5 mb/d in Iranian crude exports that the US and/or Israel may elect to impede to increase financial pressure on Tehran. If the Iranian regime survives the current conflict, the United States and/or Israel may be tempted to cripple the Iranian Revolutionary Guard Corps’ (IRGC) ability to finance itself through oil revenues.
Together, Saudi Arabia and the UAE can reroute roughly a quarter of the volumes transiting the Strait, with a combined 5 mb/d in capacity that avoids Hormuz via the UAE port of Fujairah and Saudi outlets on the Red Sea. In the run-up to the war, Iran moved an estimated 25 mb of floating storage to Asia, Saudi Arabia filled inventories in Japan and Egypt, and Saudi Arabia and the UAE preemptively increased crude exports in February by an estimated 0.5 mb/d – 1.0 mb/d. But these inventory buffers will be swiftly worked through if Hormuz is disrupted for an extended period of time.
On March 1, OPEC+ decided to resume the unwinding of past production cuts, boosting supplies by 210,000 b/d from April 1. This move is more symbolic than substantive: most OPEC countries lack spare capacity to increase output, and such small production hikes are meaningless if the oil cannot move to market. Extended disruptions will likely require major consumers, including the US and China, to release strategic stockpiles.
Many oil traders have assumed this conflict will play out like last June’s war, in which oil prices saw a short, sharp spike before swiftly falling when it became clear the conflict would end without meaningful supply disruptions. As such, the current geopolitical risk premium could quickly evaporate if President Trump signals he will abandon maximalist regime change objectives, preferring to negotiate an off-ramp or declare victory as a result of severe damage to Iran’s missile capabilities. The crisis is occurring at the weakest part of the year seasonally for an oversupplied oil market, which has prevented even larger price increases. At the same time, the market is not positioned for extended disruptions, so lasting damage or a long conflict could push prices higher.
The current spike in oil prices, as with last June, will create opportunities for US shale producers to hedge 2026 and 2027 prices, which could bring some selling pressure to the back end of the crude futures curve and lock in somewhat higher US supplies late this year and next year.
Corbeau: Global gas markets face a triple whammy: LNG transiting through the Strait of Hormuz has been disrupted since February 28, as Daniel noted; Israel has halted gas production at the Karish and Leviathan fields, impacting pipeline exports to Egypt and Jordan; and Iranian pipeline exports (mostly to Turkey) are under threat, albeit not yet halted. Together, these disruptions could amount to around 130 billion cubic meters (bcm) on an annualized basis, with the bulk of flows related to LNG transit through the Strait (110 bcm/y). With around one-fifth of global LNG flows effectively halted, the disruption to global gas markets is enormous and without precedent. However, the annualized picture is somewhat misleading: the critical variable will be the duration of the disruption, which at the moment remains uncertain.
Nearly 90 percent of the LNG transiting the Strait is destined for Asian markets, which will therefore be the most directly impacted. While China accounts for the largest share—approximately one-quarter—of the disrupted LNG volumes, Pakistan is uniquely exposed, since nearly all of its LNG imports originate from the Gulf. Europe imports relatively little LNG directly from the region, but it will be exposed to higher spot prices at a time when European gas storage levels are already critically low—only 30 percent as of the end of February.
In a market that has been in a near-constant state of crisis since 2022, there is virtually no spare LNG capacity. Some limited relief may come from LNG facilities that are ramping up production, but this will scarcely offset the loss of disrupted volumes. Intense competition for LNG cargoes is therefore likely, with only buyers able to absorb very high prices prevailing. The adjustment will mainly have to occur on the demand side—through demand reduction or even destructive measures, and fuel switching, including to coal, given that oil supplies will also be disrupted.
European spot prices jumped by more than 20 percent on Monday morning, reaching around €38/megawatt-hour (MWh) and then €48/MWh following the news of the attack on Qatar’s LNG facilities, which have been shut down. The destruction of Qatar’s LNG facilities would have a significant impact on global gas markets, as the country is currently the second-largest LNG exporter. Still, these price levels remain well below those observed in 2022, when prices stayed above €100/MWh for much of the year. However, if the disruption of LNG flows persists for more than a few weeks, and if competition among importers intensifies, prices could quickly return to those levels.
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