Ceasefire or escalation, a new normal has taken hold in the Middle East
Iran is holding back its retaliation while waiting for Hamas - Israel ceasefire negotiations. In either case, this war has changed the region permanently, and future rounds are likely to be similar.
Commercial summary: in the coming few days, there will either be a ceasefire, which would all but guarantee Hamas’ survival and political victory, or a major escalation. Escalation would severely damage Israeli ports, power stations, airports and other critical infrastructure. This may draw the US into the conflict. Watch for how the US responds to an increasingly likely round of Israeli-Iranian tit for tat strikes. But even if the US de-escalates, there is now a new normal, in which Israel can no longer fight localised wars, but only regional ones that risk drawing in the US.
Israeli survival at stake
On 29 March, we argued that Israel needs to escalate the war to force the US to back it. Israel is unable to defeat Hamas as of yet, but it may wish to obtain several years of peace by expanding the conflict to include Lebanon. Such an expansion would be costly for Israel, but it would buy it time, in that it would damage Hezbollah severely enough to bring about a few years of calm.
The alternative, a ceasefire, would keep Hamas alive and force Israel to fight on multiple fronts every time it targets Hamas, or attempts to assert its dominance over the Temple Mount/Al Aqsa mosque. Recall that, in May 2021, to stop Israel from exercising greater control over the holy site, Hamas initiated a conflict that lasted for 15 days, and during which, for the first time, the Lebanon arena was linked to the Gaza arena through the firing of missiles into Israel from Lebanon.
This trend, which the Resistance Axis describes as “unity of the battlefields”, culminated in the current war (which Modad Geopolitics predicted in July 2022 and in March and April 2023), in which the Resistance Axis is fighting against Israel from Syria, Lebanon, Iraq and Yemen to support Gaza. A ceasefire under this dynamic would be a death sentence for Israel, as it would guarantee that every conflict over Jerusalem or Gaza would expand into a regional affair.
A ceasefire under this dynamic would be a death sentence for Israel, as it would guarantee that every conflict over Jerusalem or Gaza would expand into a regional affair.
On 1 April, Israel attacked the Iranian consulate in Damascus. The objective, in our view, was to bring about greater escalation. Iran has committed itself publicly to retaliation, and exchanged messages with the US seeking to keep it out of the conflict. Iran also gave Hamas the right to negotiate away Iran’s retaliation, allowing them to tell Israel that Iran would forgo retaliation if there was a ceasefire. Clearly, Iran considers a ceasefire a victory for Hamas. Its preference is for this war to end, so that it can continue with its strategy of building up the capabilities of its allies until they can defeat Israel decisively, and while it whittles away at remaining US influence.
Stalled negotiations
There are ongoing negotiations to halt the war, at least temporarily, occurring with Egyptian and Qatari mediation. Hamas has not yet formally responded to the proposals, but its initial reaction was that the terms of the agreement are unacceptable, as they do not include Israel withdrawing from Gaza, the war ending permanently, internally displaced Gazans being allowed to return to the north of the Gaza Strip, or a clear formula to exchange Israeli captives for Palestinians held by Israel.
Israeli drills simulating expanded war
Meanwhile, Israel is continuing with civilian and military drills simulating an expansion of the war to include Lebanon, Syria and Iran, including securing provisions for the civilian population of the north and responding to Hezbollah ground incursions (Modad Geopolitics has explained here how Hezbollah may enter Israeli territory and threaten Israel’s control of the Golan Heights and of the Galilee).
The US’ untenable position
The US, for its part, does not want Israel to lose the war, nor does it want the war to expand. It cannot have both, however. Either there will be a ceasefire, which would constitute a defeat for Israel as Hamas would still survive and be able to negotiate the release of the captives on its terms, or there will be escalation that risks drawing in the US.
Brinkmanship
If there is no ceasefire, Iran is likely to directly attack Israel with a salvo of missiles, likely targeting air bases in northern Israel, including Haifa and Ramat David. Iran would claim that these bases were used to target its consulate, and wish to leave the issue there. This is when Israel would have to decide. Either it strikes Iranian targets in Lebanon, Syria and Iraq, averting broader escalation and reverting to the rules of the game, or it would strike against Iran, guaranteeing another Iranian attack and broader escalation. Iran’s allies in Iraq have already intensified their attacks on Israel, but we assess that they are acting well below their capability. We assume that any weapons found in Yemen, including high precision drones, ballistic missiles and anti-ship and anti-air capabilities, are available to Iranian allies and proxies in Iraq, Syria and Lebanon. Hezbollah shot down an Israeli Hermes 900 drone on 6 April, highlighting that it has deployed advanced anti-aircraft capabilities to the frontline. The importance of that action is that Hezbollah is signalling that it can deny Israel the ability to monitor the battlefield in any upcoming escalation. This is critical, as Israel’s other means of surveillance - thermal cameras, electro-optic cameras and radars along the border - have already been destroyed, meaning that Hezbollah can achieve tactical surprise if it wants to.
Commercial Impact:
Further escalation, in which Iran attacks Israel, Israel retaliates, Iran retaliates and then the US refrains from backing Israel, may be the only way for the US to restrain Israel.
However, doing so would severely curtail Israel’s ability to respond in future wars, and would force the US to back Israel in a likely future round in which Iran and its allies seek to again unify the battlefronts and launch a multiple front war in response to perceived or real Israeli provocations.
The US’ position in the Middle East is untenable. It has become a destabilising force to its allies, as explained in the link, and has shown that it cannot protect them, as shown by its inability to help Saudi Arabia against the Houthi or stop their continuing attacks in the Red Sea.
Meanwhile, Israel has turned further and harder to the religious Zionist right, meaning that it will continue asserting its dominance over religious sites that are sacred to both Muslims and Jews. This will guarantee further rounds of conflict, in which Iran’s allies rally to one another’s aid, as we have seen in this war.
With every round, Iran’s allies will grow stronger and bolder. That means that Red Sea disruptions will continue until there is a ceasefire, and will repeat in future rounds of conflict. It also means that attacks on Israeli infrastructure will grow more severe with each round.
Meanwhile the American public’s commitment to the Middle East is waning. That said, the Evangelical right, a large portion of the US’ influential Jewish community, and the US defence and security establishments, all remain committed to Israel.
As such, the US is increasingly likely to find itself drawn into a war that it does not have the public support to pursue, even if, somehow, there is a ceasefire that halts this round of conflict.
This turns Israel from a US strategic asset into a strategic liability - the US cannot fight for Israel across the Middle East with its current debt and deficit and while continuing to check Russia and China.
This dynamic will be the new normal for the Middle East. That in turn will impact the economies of the region, as seen with Egypt. It will also impact Saudi Arabia’s ability to become a trading hub between East and West, as explained in this piece (in which Modad Geopolitics correctly commented on the limited viability of NEOM, the scale of which has been significantly reduced).