The regional security and economic landscape lurched yesterday as the United States and Israel launched a sweeping attack on Iran and its leadership, prompting Iran to retaliate with drone and missile strikes on both Israel and Arab countries across the region.

Where do things stand this morning? Here’s what we know:

• Supreme Leader Ali Khamenei is dead, Iranian state media said early this morning.
• His death seems unlikely to end the US-Israeli attack: Washington is targeting regime change, the elimination of both Iran’s nuclear program and its navy;
• Iran has struck at targets in the Kingdom as well as the UAE, Kuwait, Qatar, Jordan, and Israel, launching both missiles and drones. There have been few reports of casualties;
• Ships are avoiding the Strait of Hormuz to steer clear of the conflict. Iranian media claimed the waterway is “effectively closed”;
• At least 201 people in Iran are dead, including more than 80 school children reportedly killed by a US or Israeli strike;
• Schools in the UAE are closed through Wednesday.

What happened: The joint US-Israeli strikes shook Tehran starting around 9am yesterday, targeting the highest senior Iranian officials including Supreme Leader Ali Khamenei. Both Tehran and Washington confirmed his death in the early hours of the morning.

The Foreign Ministry said attacks targeting Riyadh and the Eastern Province were intercepted, calling Iran’s missile and drone launches “cowardly” and “unjustifiable” and adding it’s weighing all options, including retaliatory strikes. Riyadh had signalled to Tehran that it would not allow the US to use Saudi airspace in any attack — effectively saying, “We’ll leave you alone if you leave us out of this.” That didn’t happen.

Attacks everywhere: Iran let loose waves of missiles and drones on the UAE (both in Dubai and Abu Dhabi), Qatar, Bahrain, Jordan, and Syria, with Tehran staying true to its warning that it would target US airspaces and “assets” all over the region. At least one person was confirmed killed by shrapnel or falling debris in Abu Dhabi, while Kuwait airport was struck by a drone, and multiple residential buildings were hit in Dubai and Bahrain’s Manama.

What to watch: Stocks

It hasn’t been 24 hours since the war began, so it’s a bit early to sketch out the longer-term economic impact. “The economic fallout from the attacks by the US and Israel on Iran today will depend on how long the conflict lasts, the scale of Iranian retaliations and the spillovers to the oil market,” Capital Economics Chief Emerging Markets Economist William Jackson said in a note out just after the initial attacks on Iran began.

We’re keeping an eye this morning on the Tadawul’s open. The main market closed February just above the 10.7k mark, having lost a big chunk of its YTD gains. Pundits say GCC markets could drop by 3-5% if hostilities continue through today — the prospect of higher oil prices will likely be insufficient to calm investors’ nerves as regional instability weighs heavier.

What to watch: Oil

If the conflict remains just a “limited set of strikes” — which we’ve likely already surpassed — Jackson sees oil reaching USD 80 a barrel, up from the USD 73 that Brent crude was selling at before markets closed for the weekend. But with Iranian strikes on American bases in the region and rhetoric from the White House suggesting American aggression will only end with full regime change, we are likely looking at a “longer conflict that causes disruptions to supply could send prices much higher – with a material effect on global inflation.”

Are we headed to USD 100 oil? Despite the buildup of American forces in the region having led to a “political risk premium baked into the oil price,” disruptions to oil flows out of the region could see us hit USD 100 a barrel for the first time since 2022. “This move would reflect not only the probability of physical disruption but also the extreme uncertainty surrounding maritime flows, retaliation dynamics, and political escalation,” Rystad Energy’s Jorge Leon tells EnterpriseAM.

Any disruption of oil sales — more than 54% of total government receipts in 2025 — could put pressure on the Kingdom’s state budget even if prices soar beyond USD 100. A prolonged Hormuz closure could make it difficult to get oil shipments to major markets in Asia. Routing through the Red Sea could also prove difficult if Houthis ramp up attacks, Gulf analyst at GlobalSource Partners Justin Alexander tells us.

Maintaining recent revenue levels will be difficult even if oil is priced much more highly, which could widen the deficit in the short term, Alexander added. Even if Hormuz is back to business as usual, “prices might remain elevated for some time given the risk of further conflict,” depending on the development on the ground in Iran and reduced Iranian exports, which could boost Saudi’s fiscal position, according to Alexander.

“If the Strait of Hormuz were to close, the most likely scenario is that it would be temporary, potentially lasting one to two weeks,” Leon said, adding that a prolonged closure would carry severe geopolitical consequences and likely provoke a rapid international response. “That said, even a short-lived disruption would create a significant logistical backlog.”

Saudi and other oil exporters have been ramping up their shipments in anticipation of this scenario, much like in June 2025, when Israel and the US last struck Iran. The Kingdom’s crude exports surged to 7.3 mn bbl / d in the first 24 days of February, the highest since April 2023 and up 0.4 mn bbl / d from January, putting shipments on track for a nearly three-year high, according to Bloomberg. The preemptive hike in oil exports aims to provide a necessary cushion in case tensions boiled over.

…and Opec+ is already looking to push ceilings up: The strikes will prompt the cartel to consider a larger-than-planned production increase when ministers meet today, unnamed delegates told Bloomberg. The Riyadh-led group could open the faucets to stabilize prices, abandoning its previous strategy of modest 137k bbl / d increments, which was due to be resumed after a freeze of supply hikes through the first quarter.

A supply increase won’t necessarily solve the problem: “If crude cannot physically exit the Gulf due to Hormuz constraints, incremental production increases will have limited immediate market impact. In such a scenario, the constraint is not upstream supply capacity but export routes and maritime transit,” Leon told us.

What to watch: Logistics

The big question is whether Hormuz remains open. We’re already seeing tankers avoid the strait, with Iran’s Tasnim News Agency reporting it’s “effectively” closed, although no formal announcement has been made by Tehran. Some ships reported receiving a radio broadcast — reportedly from the Iranian navy — instructing them to leave the waterway as passage is banned.

Iran’s broadcast warnings and the resulting pullback by some traders are a bid to disrupt the flow without the need for formal closure, by “causing enough ambiguity to create a de facto chokepoint shock,” Wolfgang Lehmacher, a supply chain and logistics strategist, told EnterpriseAM. Whether you’re talking geopolitical risk or investor confidence, that blurs the line between “normal” tension and crisis, forcing a persistent risk premium into energy contracts, shipping equities, and port projects linked to Gulf exports, Lehmacher added.

A full Hormuz closure would be very painful. Hormuz is the primary export route for crude and condensate pumped by the Kingdom and our neighbors, with tankers carrying 16.5 mn barrels per day (bbl / d) through the strait in 2024. The strait handles roughly 80% of our oil exports. Saudi has one key bypass: the 1.2k km East-West pipeline that stretches from Abqaiq near the Arabian Gulf to a Red Sea terminal at Yanbu, which has a capacity of up to 5 mn bbl / day, expandable by an additional 2 mn bbl / day on short notice.

The Houthis are in, too: The Yemeni rebel group signalled their intention to resume missile and drone attacks, making the Red Sea a standing variable in Tehran’s escalation toolkit. That will ensure any additional strikes resonate beyond the Bab el‑Mandeb, shaping perceptions of risk from Suez to Hormuz and forcing carriers to recalibrate already thin buffers in global container and tanker fleets, Lehmacher said .

Change to logistics routes could be even more widespread in the long term: Repeated stress on the Suez Canal and Hormuz could catalyze a new MENA-doctrine-proof corridor mix. “We are likely to see faster development of African Atlantic and Indian Ocean gateways, greater use of alternative Eurasian and intra‑regional routes, and selective upgrading of Gulf and Eastern Mediterranean ports as contingency hubs for rerouting cargo and services when doctrines or security conditions change,” Lehmacher told us Insurance, finance and development capital will follow, with more granular, corridor-specific pricing that rewards better security and governance in other routers.

What to watch: Aviation

Widespread airspace closures and massive flight disruptions spread through the region. Iran, Israel, Iraq, Qatar, Bahrain and Kuwait completely shut their skies to commercial traffic, while the UAE, Syria and Oman severely restricted flights. Saudi will host GCC nationals stranded in its airports “until conditions are suitable for their safe return to their home countries.”

The airline situation:

• Saudia cancelled all flights to Amman, Kuwait, Dubai, Abu Dhabi, Doha, Bahrain, Moscow and Beshawer until Monday, 2 March midnight;
• Flynas and Flyadeal also asked passengers to check their apps for cancellations
• Emirates, Etihad and Qatar Airways suspended flights out of hubs in Dubai, Abu Dhabi and Doha, while international airlines including Turkish Airlines, Air India, Lufthansa, British Airways, KLM and more canceled or suspended flights for several days.

What to watch: Geopolitics

GEOPOLITICS — Iran’s strikes seem to have ended a short-lived thaw in Iranian-Saudi relations. Chinese-Iraqi brokered talks had restored relations between the two bitter regional rivals in 2023, leading to a warming in relations that lasted until last month when Riyadh vowed to not allow its airspace to be used in attacks on Tehran. Yesterday’s widespread attacks in the GCC came “in spite of” that vow, according to the Foreign Ministry.

What does that mean? Although Tehran maintains attacking US assets on GCC grounds is justified self defense, it’s unlikely Riyadh will be convinced, which potentially paves the way for closer coordination with GCC neighbours — pushing the recent Saudi-UAE rift aside temporarily — and closer alignment with the US. In calls with GCC leaders, Crown Prince Mohammed bin Salman “stressed Saudi Arabia’s readiness to mobilize all its resources to assist them in responding to the brutal Iranian attacks they suffered, which undermine the region’s security and stability.”