The Economic Fallout of Israel-Iran Conflict

Zahra Niazi
‘States tend to overestimate themselves or the benefits and swiftness of war, and to underestimate their opponents’ capabilities, intentions, or the costs and duration of war.’ If anything, the 2026 war initiated by the United States and Israel against Iran shall be remembered in the annals of warfare among the most visible manifestations of this dynamic.
The war, immediately preceded by the January mass protests in Iran, did not represent a sudden rupture but rather the continuation of a 47-year-long confrontation and a more intense phase of the June 2025 war.
The US Secretary of War, Pete Hegseth, defined the war’s objectives as being laser-focused: to destroy Iran’s missile capabilities and its security infrastructure, while ensuring that it could never develop nuclear weapons. Beyond these stated objectives, among the priorities on the continuum also lay the objective of regime change, with both President Trump and Prime Minister Netanyahu explicitly calling on the Iranian population to take over the government at the outset of the war.

On 7th May 2025, Pakistan’s military forces took the international security community by surprise when it demonstrated operational superiority against its larger belligerent adversary India with its rapid and coordinated response. The Four-Day conflict proved to be a watershed moment for Pakistan, marking its rapid emergence as an important player in the region. In recent years, amidst the ongoing global competition between the United States and China, Islamabad has adopted a position of ’Strategic Balancing,’ where it maintains ties of cooperation with both Beijing and Washington. Deft diplomacy, emphasis on geo-economics, and credible conventional and strategic deterrence have remained the foundational pillars for Pakistan’s ambition as a rising middle power