Trump Says Strikes On Iran To Continue | Horizons Middle East & Africa 2/3/2026

COMBAT OPERATIONS IN THE MIDDLE EAST: A Detailed Summary

Key Concepts:

• Geopolitical Risk: Escalating conflict in the Middle East, specifically involving Iran, Israel, and the US, with regional spillover.
• Market Reaction: Impact on global financial markets, including equities, oil prices, safe-haven assets (Treasuries, USD, Gold), and airline/travel industries.
• Energy Security: Concerns surrounding the Strait of Hormuz, oil supply disruptions, and OPEC+ response.
• Regime Change: Discussion of potential scenarios for Iran’s leadership and the implications of a power vacuum.
• Business Continuity: Contingency planning by financial institutions operating in the UAE.
• Regional Conflict Expansion: The broadening of the conflict beyond the initial Iran/US/Israel dynamic to include multiple countries.

1. Current Situation & Geopolitical Overview

Combat operations are ongoing “in full force” with the stated objective of achieving all objectives. President Trump has affirmed the continuation of bombing campaigns against Iran until objectives are met, and has reportedly confirmed the death of Iran’s Supreme Leader. The conflict has rapidly expanded beyond the initial actors, with Iran launching missiles at targets in multiple countries across the region. By one count, ten countries are simultaneously under attack in some form. The situation is highly volatile, with ongoing explosions reported in the UAE, Kuwait, and Lebanon. Israel has retaliated against Lebanon following rocket fire from Hezbollah. Egypt is adjusting its LNG needs due to the closure of Israeli gas fields.

2. Market Impact & Financial Reactions

The escalating conflict has triggered significant, though somewhat muted, reactions in global financial markets.

• Equities: S&P futures are down approximately 0.9%, with European markets opening lower (down 1.8%).
• Oil: Brent crude initially spiked 13% but has since pulled back to around a 6.5% increase, currently trading at $77. The potential for further price increases exists if the conflict prolongs or the Strait of Hormuz is fully closed.
• Safe-Haven Assets: The US Dollar is up 1.4%, and 10-year Treasury yields are below 4% (3.96%), indicating a flight to safety. Gold is also performing well.
• Regional Markets: Dubai and Abu Dhabi markets are closed today and tomorrow. The Saudi index closed down 2% yesterday, although Aramco saw a 3% increase due to rising oil prices.
• Airline Industry: Major airlines, including Emirates and Qatar Airways, have suspended flights, causing widespread travel disruptions and impacting stock prices.

3. Energy Market Dynamics & Strait of Hormuz

The conflict has raised concerns about energy security, particularly regarding the Strait of Hormuz, through which approximately 20 million barrels of oil pass daily. While there hasn’t been a complete closure, tanker movements have slowed, and shipping rates have increased. OPEC+ has announced a modest increase in production (200,000 barrels per day) in an attempt to calm markets. However, analysts note that the market has already priced in a significant risk premium, and the impact of a prolonged conflict could lead to a re-acceleration of inflation. The US, having achieved energy independence, is less vulnerable than other regions like China, India, and the European Union.

4. Potential Scenarios in Iran & Regime Change

The death of Iran’s Supreme Leader has created a leadership vacuum. President Trump has suggested the goal is to encourage the Iranian population to rise up against the government. The Assembly of Experts will convene to appoint a new Supreme Leader. Analysts identify three potential scenarios:

• Hardliners Take Control: The current IRGC commander, a known hardliner, could consolidate power.
• Reformists Emerge: If hardliners are removed, reformists might take the helm and potentially be open to negotiations with the US.
• Total Collapse of Governance: The possibility of widespread unrest and a collapse of the Iranian government.

A key point raised is that regime change is unlikely to be achieved solely through air power and would require a significant internal uprising.

5. Regional Implications & Proxy Conflicts

The conflict is expanding to involve regional proxies. Hezbollah has launched attacks on Israel from Lebanon, prompting retaliatory strikes. The potential for increased involvement from the Houthis is also being monitored. Saudi Arabia has issued strong statements condemning Iran’s actions, while also recognizing the economic consequences of prolonged conflict. The UAE has suspended diplomatic operations in Tehran.

6. Business Continuity & Financial Institution Responses

Financial institutions operating in the UAE are reviewing their business continuity plans and implementing contingency measures. JP Morgan, Goldman Sachs, Citigroup, and Nomura are among those directing staff to prepare for potential disruptions. The UAE’s reputation as a safe financial hub is being questioned in light of the recent attacks.

7. Key Quotes & Statements

• President Donald Trump: “Combat operations continue at this time in full force…continue until all our objectives are achieved.” Also stated he advised Iranians to “stay home while the bombs are falling.”
• Stuart Wallace (Bloomberg Executive Editor): “What started as the Iran/US/Israel conflict expanded into a regional conflict.”
• Freddy (Global Security Analyst): “We are entering a phase of a war of attrition.”
• Sara (SVB Energy International Founder): “The market perceives threat to flow…The most significant is the flow of oil through the Strait of Hormuz.”

8. Data & Statistics

• S&P Futures: Down 0.9%
• Brent Crude: Up 6.5% (from initial 13% spike) - $77/barrel
• 10-Year Treasury Yield: Below 4% (3.96%)
• US Dollar: Up 1.4%
• Saudi Index: Down 2%
• Aramco: Up 3%
• Oil passing through Strait of Hormuz: 20 million barrels per day.
• Egypt increasing LNG purchases: 19-21 extra cargoes through June.

Conclusion:

The situation in the Middle East remains highly volatile and unpredictable. The conflict has already expanded beyond its initial scope, impacting global markets and raising concerns about energy security. While the immediate market reaction has been somewhat muted due to pre-existing risk premiums, a prolonged conflict or disruption to oil supplies could have significant economic consequences. The future trajectory of the conflict hinges on the internal dynamics within Iran, the actions of regional actors, and the potential for de-escalation or negotiation. The coming weeks will be critical in determining whether this escalates into a wider regional war or a path towards a resolution can be found.