• Iran’s recent military actions have led to significant economic repercussions and political tensions.
• While Iran aimed to assert its strength, its actions have resulted in currency devaluation and disruptions in global commodity markets.
Iran’s Show of Strength
Amidst mounting criticism of Iran’s deterrence posture following the assassination of Qassem Soleimani in January 2020, the nation seeks to demonstrate the unwavering commitment of its top leadership, notably Supreme Leader Ayatollah Ali Khamenei, in his old age. This commitment is vital as Iran faces increasing hostilities with the United States and its allies. Despite acknowledging the risks of further escalation, Iran deems assertive action necessary to safeguard its interests and uphold its credibility in the region. The recent attack, delivering one of the heaviest blows to the IRGC since Soleimani’s assassination, marks a significant escalation.
Iran’s subsequent aerial assault on Saturday was not unexpected, given the circumstances. While Iran has long provided support to Hezbollah in Lebanon, a group that has previously launched attacks on Israel as well as the Houthis in Yemen, this marked the first instance of Iran directly targeting Israel from its soil. This operation, which involved the deployment of 195 drones, 110+ ballistic missiles, and an estimated 25 cruise missiles, signifies Iran’s first direct assault on Israel in nearly fifty years of adversarial relations and stands as the most extensive drone attack ever conducted by any nation.
Operation “True Promise”
Iran’s military operation on the 14th of April around 2am local time, known as “True Promise,” was a multifaceted endeavour to achieve several strategic goals. Primarily, it seeks to enhance Iran’s deterrent image by showcasing its unwavering resolve to respond to perceived provocations, particularly those originating from Israel. This operation serves as a notable showcase of Iran’s capabilities in both drone technology and missile warfare. By deploying a diverse array of weapons, such as the Shahed-136 and Shahed-238 models, alongside ballistic and cruise missiles, Iran highlights the sophistication of its military arsenal. While roughly half of the 110 ballistic missiles used were successfully intercepted, the failure of the remainder during flight raises questions about the overall performance of Iran’s ballistic missile systems.
Critics and analysts have pointed to the operational challenges and technical limitations that may have contributed to the failure of these missiles to reach their intended targets. Factors such as guidance errors, propulsion system malfunctions, or inadequate payload delivery mechanisms could have played a role in the unsuccessful trajectories of these missiles. The performance gap observed during this missile strike also raises concerns about Iran’s overall military readiness and preparedness to confront regional adversaries. Iran has made significant advancements in developing its missile technology, including domestic production. However, the recent incident underscores existing vulnerabilities and shortcomings in its defence infrastructure.
The deployment of advanced weapons such as the Emad long-range ballistic missile and the Paveh cruise missile during the attack towards military installations in Israel, including the Nevatim airbase allegedly linked to the strike on the Iranian consulate in Syria, Iran’s intent for strategic retaliation is evident. Additionally, the impact of the attack extended to the Navatimairbase, where five Iranian missiles damaged a C-130 transport plane.
While Israel celebrates the success of its interception operation, differing perspectives in the Arab world suggest that the thwarted attack may have shifted the balance in favour of Iran. Lebanese commentator Amal Saad emphasizes this shift, highlighting Iran’s direct involvement in attacks against Israel as a departure from its previous role of merely supporting resistance movements with weapons and training.
Economic Repercussions
Iran’s attack on Israel has triggered significant economic repercussions beyond immediate military concerns. Fluctuations in Iran’s currency markets ensued, with the rial plummeting to historic lows against the US dollar amid heightened anxiety over regional conflict. This volatility extended to gold transactions across Tehran and other markets, reflecting broader market uncertainties. Additionally, the attack’s economic ramifications extended to global commodity markets, with gold prices surging and Asian stock markets experiencing declines. Concerns over potential disruptions to oil supply further exacerbated market jitters, with analysts closely monitoring Israel’s response to gauge the extent of the risk.
Amid escalating geopolitical tensions sparked by Iran’s unprecedented attack on Israel, global markets react with a mix of caution and concern. Gold prices surged, reaching $2,358 per ounce on Monday, as investors sought safe-haven assets amidst the uncertainty. Bullion’s 18% surge this year, fueled by fears of an Iran-Israel conflict, peaked at an all-time high of $2,431 per ounce on Friday. Additionally, oil prices, which had risen on Friday in anticipation of retaliatory action from Iran, saw a slight retreat during Asian trading hours on Monday. Despite the retreat, US crude futures have risen 6.7% this year, while Brent crude has surged over 10%.
Broader Implications
The attack’s aftermath has affected commodity markets and had repercussions on global stock markets, with US futures cautiously higher after President Joe Biden and his national security team assured counterparts that the US would not participate in any counter-strike against Iran. This underscores the interconnectedness of global markets and geopolitics in the face of heightened tensions in the Middle East.
Consequently, the Tehran prosecutor’s office initiated legal action against a journalist and a newspaper for allegedly undermining societal psychological security and disrupting the country’s economic atmosphere. This highlighted concerns about the broader ramifications of the conflict on domestic stability.
The UN Security Council held an emergency meeting to address the situation urgently. The meeting underscored the gravity of the situation and the international community’s recognition of the need for immediate diplomatic intervention to de-escalate tensions and prevent further violence. Additionally, the G7 nations have announced plans to convene and deliberate on the crisis, highlighting their commitment to collective action and coordinated efforts in response to the evolving situation.
What does this all mean?
While Iran may have sought to assert its strength and retaliate against perceived provocations with its recent military actions, the costs are substantial and far-reaching. Economically, Iran faces instability with fluctuations in currency markets and disruptions in global commodity markets, particularly in gold and oil. These economic repercussions threaten Iran’s financial stability and could exacerbate existing economic challenges.
In light of these consequences, Iran’s recent actions underscore the complexities and risks of pursuing aggressive military strategies. As diplomatic efforts intensify and global leaders seek to de-escalate tensions, the path forward remains uncertain. However, it is clear that the costs of Iran’s military actions extend beyond immediate military concerns, profoundly impacting economic stability, political relations, and regional security.
