Iranian strikes against various targets in the Gulf region continues, and again in the case of a hit on oil storage facilities in the port of Fujairah, these have included explicit targeting of oil related infrastructure. One senior member of the IRGC declared the “Strait of Hormuz closed”, adding – despite Iran’s evident inability to impose such a closure militarily facing the U.S. Navy – to commercial insurance concerns about the safety of navigating the waterway, and there continues to be no indication of cracks in the Iranian regime or a reduction in its willingness to continue to fight.
Overall, while the U.S. and Israeli air campaign against Iran continues, there is at present no indication that the fighting is about to stop, or that U.S. and Israeli forces have a near-term military strategy to compel the Iranian government to stop firing missiles and drones at the Gulf region. It is consequently for a good reasons of high uncertainty that asset prices are falling, and energy commodity prices continue to gradually rise. At the moment on Day 4 of the conflict, the eventual end of it is not immediately in sight.
The ongoing Iranian drones and missile attacks on the Gulf region exposes the region to increasing risks and strategic dilemmas. As we have learned from Ukraine’s long battle against Russian drone saturation attacks, you cannot over time defend against the onslaught of cheap drones relying on very expensive interceptor missiles. Instead, as Ukraine has shown you need to rely on defenses that “match the price point”, including things like small interceptor drones, mobile fire groups, EW jammers, or heavy guns anti-air guns. Only this type of layered air defense can protect you against ongoing drone attacks (Ukraine typically disables up to 90+% of attacking Russian drones), while leaving expensive interceptor missiles to combat incoming larger ballistic missiles. Such layered defenses cannot however be built from scratch overnight, but only in the medium-term in the Gulf region.
In the early days of the war, it is clear that several of the air defenses of the Gulf Arab states have performed admirably in neutralizing the vast majority of incoming Iranian ordonnance, but it is also clear that this effort is likely to have relied heavily on eventually scarce interceptor missiles. As can be seen in Figure 1, by March 2 the Emirati Ministry of Defense stated that they had intercepted 645 Iranian drones, a highly impressive number, but also one that will cause doubts about the scope of the Emirati air defense stockpile.
Figure 1: Iranian Attack Ammunitions Intercepted By Emirati Air Defenses until March 2 2026
Source: Arabtimes
A Bloomberg report citing estimates that UAE only had another week of air defense missile supplies available at the current rate of use was met with immediate denial from the UAE authorities, highlighting the sensitivity of these data. The extent of Gulf Arab air defense stockpiles is not known, but the UAE interception numbers make it clear that the Iranian onslaught is very large and ongoing, and if sustained for a prolonged period of time will eventually exhaust available stockpiles. This might at some point see Gulf region authorities forced to begin to ration the use of such ammunition and for instance only choose to protect very specific locations, rather than their entire territory. The ongoing extent of Iranian drone and missile attacks on the Gulf region hence remains a crucial ongoing parameter to watch, given its evident political and economic effects.
In some ways, Israel might be said to be in an almost better position, as it is overwhelmingly targeted by fewer but more powerful Iranian ballistic missiles, but do not face the number of Iranian attack drones aimed at the Gulf region. Iranian missiles against Israel are more devastating when their make it through air defenses, but there are fewer of them. And it is probable that the ongoing U.S. and Israeli military campaign against Iran will be more successful in eliminating larger mobile ballistic missile firing ramps than smaller – often truck-based – launching ramps for Shaheed-type drones. This implies that Iran’s ongoing retaliation against the Gulf region might be more sustained and longer lasting in scale than against Israel.
Ongoing sizeable Iranian retaliation against the Gulf region exposes its current strategic predicament; It remains unlikely that the Iranian regime will collapse, leaving the Gulf region with a likely implacably hostile neighbor, with which future diplomacy with a new leadership might be very difficult. Iran’s current strategy, which appears to try to pressure the U.S. to end the war by attacking the Gulf region, may well – if air defenses are eventually exhausted – prove successful.
Gulf lobbying of President Trump to end the war, however, would teach Iran’s new regime that when a new conflict with Israel and/or the U.S. breaks out, Tehran should hit out forcefully at the Gulf region again. The Gulf region hence today faces an unenviable choice between possibly sustaining rising war damages in the current possibly longer conflict, or risking being far more exposed to new and more powerful attacks in the future, if they successfully push to end the current fighting early. Both scenarios pose significant both short and long-term economic risks for the region.
The ongoing Iranian retaliation against the Gulf region, which is the arguably most surprising aspect of this war so far, also poses an operational challenge to not least the U.S. military, as they cannot simply rely on “refighting the War of June 2025”, but have to improvise to overcome this Iranian surprise response aimed at Washington’s regional allies.
As the air campaign proceeds and is likely to by now have severely damaged Iran’s air defense systems, the U.S. military is consequently likely in the coming days to significantly expand the use against Iran of more and heavier components of its formidable military arsenal (far outstripping what Israel had available in June 2025), as it pursues a military advantage in the conflict. This suggests an increased pace of U.S. bombings inside Iran, aimed at a variety of targets, including especially the elements repeatedly named by senior administration officials as the key target areas – nuclear facilities, missiles/drones and missile/drone production sites, Iranian navy targets and broader regime infrastructure.
In sum, the ongoing war around Iran is likely to intensify in the coming days, likely resulting in the near-term continuation of current rising risk premia emanating from the Gulf region.
Jacob
