'Escalation is coming': Middle East on edge as new Israeli-US attack on Iran looms
Neither Iran nor the US feel the need to make
concessions, risking a second round of war that is likely to devastate the Gulf
Published date: 23 October 2026
US diplomats are preparing for embassy evacuations. Israeli fighter jets are conducting sorties on the Iranian
border. The mood among Arab and US officials in the region who spoke to Middle
East Eye is that it’s a question of when, not if, the US and Israel resume
attacking Iran.
With Iran threatening to retaliate by bombing
trillions of dollars’ worth of US-linked data centres and AI facilities in the
Gulf, along with energy installations and airports, the stage seems set for
round two of the war.
“An escalation is coming. Whether it’s before the US
midterms or after is not relevant. The purpose of the escalation is,” Aaron
David Miller, a former Middle East negotiator for Republican and Democratic US
presidents, told MEE.
Direct fighting between the US and Iran largely
stopped after the signing of a fragile ceasefire in April, but the two never
implemented a 14-point Memorandum of Understanding (MoU) signed in June to
advance a settlement.
The agreement was widely seen as giving Iran sweeping
concessions that experts say the Trump administration simply cannot stomach.
“There is a foundational gap, galactic in scope, that
can’t be bridged. The Iranians are not going to change their position on the
Strait of Hormuz, the nuclear issue or the Houthis to the extent that Trump
needs in order to spin a win,” Miller said.
Trump's emissaries are laying the ground for a return
to fighting.
“We are going to have to keep working at this to make
sure there’s a regime change eventually,” Republican Senator Rick Scott, a key
Trump ally, said in an interview with Fox on Thursday.
Mike Waltz, Trump's ambassador to the United Nations,
told The Financial Times that the White House is ready for a prolonged
conflict.
"The president and the US Navy can maintain this
blockade [on Iranian ports] for the foreseeable future,” he said in an
interview released on Friday.
A war that started over what the US claimed to be
strikes aimed at crippling Iran’s nuclear programme has drifted into an
all-encompassing battle over who calls the shots in the Middle East.
For example, Iran wants to impose fees on vessels in
the Strait of Hormuz. Iran and the US have conducted tit-for-tat strikes in the
waterway. The US has imposed a blockade against Iran that is devastating its
economy, while Iran is attacking vessels there, sending shipping rates soaring.
At least 27 ships have been attacked this month alone,
the highest number since March.
The tensions between the two have also contributed to
the collapse of a ceasefire in Yemen, where fighting between the Iran-aligned
Houthis and Saudi-backed internationally recognised government is raging.
Experts say a return to war may be inevitable because
the status quo suits neither the Trump administration nor Tehran, but neither
side feels weak enough to make concessions.
'US watches oil volumes, Iran watches the price'
Iran and Trump are both watching the oil market and
gleaning different lessons from it, Gregory Brew, an expert on energy and Iran
at Eurasia Group, a geopolitical consultancy, told MEE.
This week, energy firm Kpler published data showing
that Middle East oil and product exports reached pre-Iran war levels last week.
Some experts cautioned that the data is skewed towards a burst in activity, but
more oil is coming out of the region from US allies, while Iran’s exports are
choked by the US blockade.
Saudi Arabia is exporting oil via the Red Sea,
bypassing the Houthis, who control the Bab al-Mandab, with a pipeline to the
Mediterranean. Meanwhile, Gulf states inside the Strait of Hormuz are using a
shuttle service by which state-owned boats bring oil to larger tankers waiting
in the Gulf of Oman. The US says its navy is escorting the vessels, but at a high cost.
The rise in volumes has not lowered the price. Brent,
the international benchmark, is up a whopping 43 percent since the MoU was
signed with Iran. Diesel prices are up around 35 percent, while gasoline is up
less than 10 percent.
No one doubts that Iran’s economy is hurting.
Inflation in September was up a staggering 90 percent, but Brew said that
Iran’s rulers believe they can endure another round of fighting while the Trump
administration will fold.
“If the US is watching volumes in Hormuz, the Iranians
are watching price. And they are pretty confident they can withstand pressure
over a longer period of time than Trump can,” Brew, at Eurasia Group, said.
“In a context where the US and Israel are bombing Iran
again directly, we are certain to see more aggressive Iranian strikes on energy
infrastructure. The US will also have fewer resources to manage this escort
system,” he said.
"Energy prices will stay elevated," he
added.
'Devastating for the Gulf'
Before the US and Israel attacked Iran in February,
there was a lobbying dash from some Gulf states to stop it. During the war,
Saudi Arabia and the UAE joined the US in striking Iran, but then Riyadh
pivoted to supporting mediation. Reuters reported that the UAE paid Iran to
stop attacking it.
In round two, experts say, the Gulf will struggle to
remain strategically relevant, although it will be on the front lines of Iran’s
reprisals. The Gulf states faced thousands of drone and missile attacks from
Iran after the US and Israel’s February attack.
“From the Gulf perspective, this is going to be
devastating,” Abdullah Baabood, an Omani academic and international relations
expert, said. “Already we see serious economic problems in the Gulf.”
Asharq Bloomberg reported Bahrain is expected to
receive a bailout led by the UAE to shore up its collapsing foreign currency
reserves. Qatar’s economy shrank
15 percent
year-on-year. The IMF expects the UAE’s economy to shrink four percent. Saudi Arabia has had to cancel a
prominent investment conference because of Houthi attacks.
“The Gulf is hostage to a crisis that has no end,”
Baabood said. “Qatar is trying to mediate. Oman has been pushed aside by Trump.
The UAE, Kuwait and Saudi Arabia are very quiet. They just don’t know what to
do. They can’t read Trump.”
“Other than Israel, no one has real interest in a
serious continuation of the war,” Marwan Muasher, a former Jordanian foreign
minister and vice president for studies at Carnegie Endowment for International
Peace, told MEE.
The expectations of a return to war come against the
backdrop of Israeli general elections next week. In his endorsement of Israeli Prime Minister Benjamin Netanyahu,
Trump raised the stakes of fresh strikes, saying he wanted help to “finish the
job” against Iran “unless they change their ways rapidly”.
Experts say that given the war’s popularity in Israel,
a return to fighting could help Netanyahu before the vote, or help him stay on
as prime minister if the outcome of elections is indecisive.
Baabood said that no one doubts Israel and the US’s
ability to “devastate” Iran’s infrastructure, but that the Islamic Republic can
still do “significant” damage to the Gulf.
In an interview with Dropsite News this
week, Major General Mohsen Rezaei, the secretary of Iran's Supreme
National Security Council, left little doubt that Iran would attack Gulf energy
sites if the US resumes the war.
“If the US strategy is to prolong the war while using
neighbouring countries’ energy infrastructure to offset the pressure arising
from Hormuz and maintain the blockade of Iran, those governments should not
assume they can participate in economic warfare against Iran without putting
themselves at risk,” he said.
Where is the pain for Donald Trump?
One of the key questions in a second round of fighting
is how well the Gulf states can defend against Iranian attacks that may spike
energy prices further.
A US Inspector General’s report in September said that the US faces "strategic inventory
shortfalls” in key munitions. MEE reported in March that the US was already short of
interceptors. That was before weeks of high-intensity fighting in the region.
The Trump administration has repeatedly denied being short of munitions.
The Gulf states' vulnerability to Iranian drones has
been crystallised by strikes from the Houthis on Saudi Arabia in recent weeks.
The kingdom is reeling under the weight of Houthi
attacks which have repeatedly targeted its airports and high-profile energy
sites. At least 21 people have been killed in Houthi attacks on Saudi airports
since the start of October, including religious pilgrims, according to the
kingdom’s authorities. An attack attributed to militias in Iraq aligned with
Iran hit the kingdom’s East-West Pipeline in September.
"Continuing the war will only bring more
difficulties to countries in the Gulf, and it’s clear it will not result in
regime change in Iran. Meanwhile, Trump is suffering domestically because of
rising fuel and food prices” in the US, Muasher told MEE.
But Miller, now a senior fellow at the Carnegie
Endowment for International Peace, said that Trump may feel less restraint than
he is given credit for, particularly given his anger at Iran for stymying his
plans for a quick victory earlier this year.
“There is no cost-benefit analysis because Donald
Trump is going to be OK. He may lose the House and maybe the Senate in
midterms, but he will be OK. His family will be OK. He will build his
presidential library,” Miller said.
“Trump's urgency to end this thing is not evident.
There is no accountability. Where is the pain for Donald Trump?”