Israel-Iran war and its global impact: Rising tensions threaten trade, security. India caught in the crossfire?

Operation Rising Lion—Israel's war against Iran—was launched in the early hours of  June 13, 2025, by employing massive air and missile strikes against multiple strategic targets in Iran, which included the Natanz and Fordow nuclear sites, Islamic Revolutionary Guard Corps (IRGC) command centres, military bases,  aerospace force headquarters and ballistic missile depots, the Parchin missile R&D complex, air defence radars and missile sites as well as the Isfahan air base and drone development centre. 

 

Iranian communications and radars were jammed as swarms of cheap drones were used as decoys to confuse and saturate its air defences.

 

The air attacks were preceded by Israeli drone strikes on private residential buildings and public offices in Tehran and other cities, which succeeded in assassinating some top Iranian military commanders and nuclear scientists, as a prelude to the commencement of the air attacks. 

 

Significantly, in the past few months, Israel had largely succeeded in undermining the Hamas, Houthis and Hezbollah, as well as removing the Assad government in Syria, which were perceived to be functioning as regional proxies of Iran. It appears that Israel had the tacit approval of the United States and other Western countries like the UK, Germany and France for its offensive actions against Iran. Though officially the US government has tried to disassociate itself from the current round of Israeli attacks against Iran, President Donald Trump has indicated his personal approval, as apparent from his appreciatory posts on Truth Social and related threats to the Iranian leadership. 

 

Israel's aim appears to be to defang and punish Iran and permanently remove its capacity to undertake hostile actions against Israel directly or through its proxies—essentially by dismantling its nuclear programme and targeting its ballistic missile launchers, missile and drone storage sites as well as missile and drone production facilities. In response to Israel's actions, Iran has decided to treat the Israeli attacks as acts of war and launched Operation True Promise III, to retaliate with drone and missile strikes against targets in Israel and expose its vulnerabilities, thus setting the stage for escalatory tit-for-tat attacks by both sides. Iran also hopes for some sort of Islamic consolidation—across the Sunni-Shia divide—and consequent rollback of reconciliation efforts with Israel by Arab countries, especially the Abraham Accords.

 

It may be recalled that Israel, technologically and militarily powerful,  serves as the security outpost of Western countries, especially the US and UK,  in the Middle East, ever since the end of the Second World War. Iran, meanwhile, is the most powerful Islamic (Shia) country in the region, which has built up its ballistic missile and drone warfare capabilities and is supported by China and Russia.  Iran and the US have had a hostile and tumultuous relationship ever since the Islamic takeover of Iran led by Ayatollah Ruhollah Khomeini, by dethroning its US-supported monarch. 

 

Further, in 2002, in the run-up to the Iraq War,  Iran (along with Iraq and North Korea) were the three countries classified as the "axis of evil" by US president George W. Bush to justify the war on Iraq, by contending that these countries were sponsoring terrorism and seeking weapons of mass destruction. Even at that time, it was generally believed that Israel had a role in influencing the US government to target Iran, along with Iraq, as these two countries were seen as the strongest potential enemies of Israel. Hence, for a long time now, Iran has been on the hit list of Israel and, by extension, the  US, especially their right-wing politicians, who fear that Iran's acquisition of nuclear weapons would be a devastating development for Israel and the region. 

 

Thus, it was a given, that, having attacked and occupied Iraq in 2003, and having evicted Saddam Hussein from power therein, Iran would be the next major target, at some point in the future, for the Western powers and Israel. Moreover, all through this period, Israeli right-wing leaders like Benjamin Netanyahu had been trying to convince the US authorities to start a war with Iran, just as they had done in 2003 with Iraq. Israel perceives that the desired time of reckoning, to militarily destroy Iran—the last bastion of resistance to its existence—appears to have finally arrived. However, at this point in time, the US government does not appear keen to get involved directly in a war with Iran, although it is not averse to using Israel as its proxy to do that job, just as it continues to use Ukraine in a similar role against Russia, in Europe.

 

Israeli air and drone attacks on June 13 resulted in the destruction of Iranian air defences as well as a significant number of military targets, including drone and missile production facilities. In response, Iran retaliated by launching a barrage of drone and missile strikes against military targets in Israel. Thereafter, over successive days and nights, both sides have gradually escalated by attacking civilian targets like apartment buildings and state media offices as well as economic targets like the South Pars gas fields, by Israel, and, in retaliation, the Haifa oil refinery and the Rehovot University buildings by Iran. Consequently, it is likely that Iranian proxies like Hezbollah and the Houthis may launch attacks on targets in Israel and on US bases, with an ever-increasing likelihood of spillover into Iraq, Lebanon, Yemen and Syria as well as heightening the possibility of drawing the Arab States and US forces directly into the war. 

 

In sum, Israel's Operation Rising Lion severely damaged Iran's nuclear and military infrastructure, killed hundreds of Iranians, shattered air defence systems and triggered large-scale civilian displacement. Iran's retaliatory response Operation True Promise III exposed vulnerabilities in Israel's missile defence systems, hit vital civilian and economic infrastructure and caused significant civilian casualties despite the extensive availability of urban shelters. Now, both nations face further military escalation, intense international diplomatic pressure, economic stress and humanitarian crises.  

 

Global impact of the war

 

First, the political impact. The North-South divide is going to widen, as the richer/ Western countries, led by the US, align or sympathise with Israel, while the rest of the world, led by China and Russia, will largely sympathise with Iran, more so due to the latter's support for the Palestinians of Gaza. Even within Western countries, political support for the Palestinian cause is likely to gain in strength. Countries like India, Jordan, Egypt and Turkiye will have to resort to some deft diplomatic tight-rope walking as they balance their interests on both sides of this political and economic divide. 

 

Second, the economic impact. Crude oil prices have risen and are hovering over $75 a barrel, leading to increasing inflation. Any further development like the blocking of the Straits of Hormuz or the Persian Gulf could lead to a global energy crisis and a further spike in prices. Stock markets are experiencing sharp corrections and investor confidence in emerging markets is declining. Supply chain disruptions and delays are likely, due to missile and drone strikes in the Red Sea, with concomitant rise in insurance premiums and delivery costs.

 

Third, the military impact. The military advantage of stand-off air-to-ground attacks, precision-guided munitions (PGMs), especially ballistic and hypersonic missiles, as well as AI-powered drones and anti-drone systems,- have once again been highlighted. Equally, the criticality of air defence systems and ballistic missile defence (BMD) systems have been emphasised.

 

Fourth, the security impact. The risk of attacks in various parts of the world by Middle Eastern terror groups, or their proxies in countries like Pakistan and Afghanistan, is likely to increase. In the long run, however, much will depend on whether Israel is able to achieve its objective of defanging Iran militarily—which, as of now, appears to be a tall order. Further, unless Israel and the US agree to the establishment of a Palestinian state, instabilty and unrest in the Middle East are likely to continue.

 

Fifth, the impact on India. Politically, India is caught in the crossfire between Israel and Iran as it has critical strategic interests with both. Israel is an important defence supplier for India whereas Iran provides India a strategic gateway into Central Asia and Afghanistan through its Bandar Abbas port. Similarly, India has competing interests with Russia and the US, which are on opposite sides in the conflict. Thus India will have to balance its interests deftly, without alienating either side. 

 

Economically, India, which imports 80 per cent of its energy needs, could face serious challenges of inflation, rupee depreciation and stock market volatility especially if attacks on oil and gas facilities continue or trade routes are blocked. Also, with the destruction at Haifa port, the plans for the India-Middle East-Europe Economic Corridor (IMEC) will once again be delayed. Most importantly, if the conflict spreads across the Middle East, India's diaspora interests will be adversely affected, more so if the situation deteriorates to a point where repatriation is necessitated.

 

At this point, while the G7 meet is taking place in Canada, efforts could be on to stop the war, or possibly, to shape the next steps in pursuit of long-term Western interests. Meanwhile, Russia and China may be planning and coordinating their efforts to ensure that Iran's capabilities are not decimated and that their long-term interests in the region are protected. 

 

Nonetheless, Iran needs to understand that Israel has a right to exist peacefully while Israel needs to accept and facilitate the creation of a Palestinian state, in the interests of promoting peace in the Middle East region.  In the meantime, the attacks will continue and largely, civilians on both sides will continue to bear the brunt. 

 

The writer was Vice Chief of the Indian Army. The opinions expressed in this article are those of the author and do not purport to reflect the opinions or views of THE WEEK.

 

 

Middle East