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Israel vs. Iran: Military Strikes, Retaliation, and Economic Uncertainty
JOHANNESBURG, SOUTH AFRICA
IN the early hours of last Friday morning, the Israel Defense Forces (IDF) launched Operation Rising Lion, a military offensive aimed at dismantling Iran’s military and nuclear infrastructure. According to the Israeli government, the operation’s objective is to neutralize Iran’s nuclear capabilities.
The airstrikes occurred while the United States and Iran were engaged in nuclear deal negotiations. However, the failure of these talks to produce meaningful progress seemingly provided Israel with an opportunity to strike Iran’s nuclear sites.
Iran’s Retaliation and the Regional Impact
Iran is retaliating with missile strikes and has killed more than 10 and injured more than 270 Israelis, at the time of this publication on the evening of the 15th of June 2025 in Johannesburg. Israel’s offensive remains focused on Iranian military and nuclear sites rather than political leadership, signaling that regime change is not its immediate goal. This approach aligns with the reality that no clear alternative leadership exists to replace Iran’s current political leaders.
On Friday, South Africa’s government sent condolences to the “Government of the Islamic Republic of Iran and the families of all victims.”, the official statement of the foreign affairs ministry said.
For decades, Israeli Prime Minister Benjamin Netanyahu and other Israeli leaders have expressed concerns about Iran’s nuclear ambitions, labeling them an existential threat to Israel. The October 7 attacks further solidified Israel’s resolve in confronting its adversaries across the Middle East.
Iran has long funded groups hostile to Israel, including Hamas, Hezbollah, and the Houthis.
On X this past week, I shared my uncertainty about the future of the Middle East. However, I remain confident that Israel will continue to be a dominant economic and military force in the region.
From a historical perspective, Israel is in a much stronger position today compared to the early 1970s. Given this trajectory, I remain hopeful that regional stability may eventually be achieved, allowing the Middle East to play an even more significant role in the global economy.
Israel expert and author Dan Senor, known for his books Start-Up Nation and The Genius of Israel, believes more Arab countries will be open to normalizing relations with Israel. He argues that Israel’s demonstration of military dominance in the Middle East makes it a valuable ally. Senor shared these views on the Prof G Podcast with Professor Scott Galloway this past weekend. His comments offer hope for improved regional ties.
The primary destabilizing force in the Middle East remains Iran. Its sponsorship of terrorism continues to fuel instability. A shift toward governance by moderate leaders willing to embrace Israel would significantly improve the dynamics of the Middle East. However, as long as Iran is led by anti-Israel radicals, the prospects for lasting peace remain dim in the Middle East.
Economic Consequences of the Conflict
The ramifications of this conflict extend beyond regional geopolitics—they also threaten global economic stability.
Following the Israeli strikes, oil prices spiked by more than 7% on Friday, a development that carries direct consequences for South Africa as a net-importer of oil. Fluctuations in oil prices influence fuel costs, thereby impacting inflation and our cost of living.
Johann Els, the chief economist at Old Mutual, has highlighted the uncertainty this conflict introduces into inflationary trends and interest rates.
The South African Reserve Bank (SARB) has been monitoring geopolitical risks closely in recent years, and with its next interest rate decision scheduled for the end of next month, it remains unclear how the Israel-Iran conflict will evolve by then.
Israel has signaled that its strikes on Iran will continue indefinitely, which implies continued Iranian retaliation.
Global financial markets also reacted sharply to Israel’s strikes on Iran. On Friday, American stocks tumbled, with the Dow dropping nearly 1.8% as investors fled riskier assets. The S&P 500 declined by 1.1%, while the Nasdaq Composite fell by 1.3%.
There are reports that Iran is considering the closure of the Strait of Hormuz. The Strait of Hormuz is the most important oil shipping gateway in the world. Its closure would hurt the global economy. Iran’s shutdown of the Strait of Hormuz must not be allowed, in my opinion.
If Iran closes the Strait of Hormuz, then the US Army should join Israel. And Iran should pay a very heavy price.
The Strait of Hormuz is one of the things that have made American policymakers cautious in their approach to Iran, balancing economic considerations with diplomatic pressures.
Despite U.S.-led sanctions, Iran remains an oil supplier, accounting for more than 3% of global oil supply. Who are they selling their oil to? China, of course.
Gold prices also surged above $3,440 per ounce on Friday, reflecting heightened uncertainty as investors sought refuge in safe-haven assets. Business Day reported that the surge was driven by concerns over the volatile geopolitical landscape.
In his Financial Times column on Friday, famous economist Mohamed A. El-Erian noted that Israel’s strike on Iran delivers a severe blow to the global economy at an already vulnerable moment.
Mohamed’s assessment aligns with Johann Els’ concerns about the conflict’s implications for inflation and global growth.
My hope is that this conflict ends soonest, and diplomacy is pursued. This will restore stability and reduce uncertainty in the global economy. PM
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© PHUMLANI M. MAJOZI