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Iran warns of market shock from new Israeli strike as election tilts regional balance
As Netanyahu's bloc falls short of a parliamentary majority, Iran signals economic consequences of renewed military escalation.
What happened
Iran's Foreign Minister Abbas Araghchi warned Wednesday that any new Israeli military action in the Persian Gulf would inflict "devastating impact" on international markets, particularly energy supplies. The warning came as Israeli officials counted ballots from Tuesday's parliamentary election, which left Prime Minister Benjamin Netanyahu's bloc with approximately 53 seats—eight short of the 61 needed for a majority in the 120-seat Knesset. Netanyahu's Likud remains the largest party with 26 seats, but will need coalition partners to form a government, likely including Arab parties that have historically opposed escalation with Iran.
The two countries have directly fought for the first time in their history under Netanyahu's leadership, beginning with a joint U.S.-Israeli offensive in February 2026. Netanyahu has explicitly ordered Israel's military and intelligence services to pursue regime change in Tehran, with backing from U.S. President Donald Trump. Meanwhile, U.S. Treasury Secretary Scott Bessent claimed Wednesday that economic sanctions under "Operation Economic Outcast" have been highly effective, with internal estimates showing Iran's economy could contract by as much as 25 percent over one year. Qatari mediators have presented Iran with a new peace proposal designed to avert another major military confrontation, though diplomacy remains uncertain.
Chanakya's Move
Iran is signaling economic pain as a deterrent, betting that global market fears will constrain Israeli and U.S. action. Abbas Araghchi is framing the threat as one that hurts all parties—oil producers and consumers alike—to build pressure against escalation from neutral actors. Simultaneously, Netanyahu faces a narrowed window: his election victory is hollow without a majority, Arab parties now hold kingmaker leverage, and a Qatari peace proposal is live on the table. Netanyahu's directive to topple Iran's regime looks strategically ambitious but tactically constrained. Trump's public backing ("ready to finish the job") could provide air cover for strikes, but only if Netanyahu can move quickly and maintain coalition discipline. Iran's move is partly defensive (warning off action) and partly political (appealing to mediators and fence-sitters). The counter-move would be for Israel to act before coalition talks expose divisions, or for Arab parties to extract concessions in exchange for supporting Netanyahu.