Tuesday briefing: How the conflict in Iran shattered the Gulf state image of peace and luxury

Following a weekend of escalating conflict in the Middle East, Mojtaba Khamenei has assumed leadership in Iran, succeeding his late father. This transition occurs as oil prices surpass $100 a barrel and regional casualties mount. Over the weekend, both sides struck new targets, including civilian infrastructure, with Bahrain accusing Iran of attacking a desalination plant and Israel targeting oil depots in Tehran. The US reported another soldier's death, and Saudi Arabia announced its first fatalities. The conflict, now in its tenth day, has displaced over half a million people in Lebanon and resulted in hundreds of deaths there, with Israel warning of a prolonged war.

On March 12, 2026, amidst the ongoing United States-Israel war on Iran, Iran launched missile and drone attacks targeting Gulf nations, causing significant disruption. Bahrain reported strikes on fuel tanks in Muharraq Governorate, prompting residents to stay indoors. Saudi Arabia intercepted drones aimed at the Shaybah oilfield and the embassies district, while Kuwait reported a drone attack on a residential building, wounding two. The United Arab Emirates responded to a missile threat, and a container ship was attacked near Jebel Ali. Jordan experienced sirens in all cities. These attacks have further destabilized global energy markets, with Brent crude prices rising sharply.

Recent attacks on oil tankers and ports in the UAE, specifically near Ras Al Khaimah and Fujairah, highlight the growing vulnerability of Gulf states amid escalating tensions between the U.S. and Iran. These incidents, occurring this week and on Saturday, have disrupted maritime activity and raised concerns about regional security. Despite Gulf states' long-standing military partnerships with the U.S. and attempts to diplomatically prevent conflict, they are now bearing the brunt of a war they did not initiate. Gulf leaders, who hosted negotiations and warned the U.S. president of the consequences of attacking Iran, feel they were not consulted before the strikes. The scale of Iran's response has shocked the Gulf states, who fear further attacks on their infrastructure despite assurances to Tehran that their bases would not be used for attacks.

Iranian-designed Shahed drones, costing significantly less than traditional air defense systems, are increasingly used in conflicts from Ukraine to the Middle East, straining U.S. air defenses. Recent attacks, including Operation Epic Fury, targeted U.S. forces and allies in the Gulf, causing casualties and infrastructure damage despite the use of expensive interceptors like Patriot missiles. The high cost of these interceptors raises concerns about the sustainability of this defense strategy. Ukraine, a leader in drone warfare since the 2022 Russian invasion, has developed cheaper interceptor drones, costing as little as $1,400, with a high effectiveness rate against Shahed-type drones. The Pentagon and at least one Gulf government are reportedly interested in Ukraine's low-cost drone interceptor technology as a more affordable solution.

Recent Iranian attacks in the Gulf have expanded beyond traditional oil and gas infrastructure to include data centers, signaling a shift in targeting strategic assets. On March 1st, drone attacks damaged three Amazon Web Services data centers in the United Arab Emirates and Bahrain. These attacks suggest a deliberate effort to undermine the Gulf's post-oil future, particularly its ambitions in artificial intelligence. The region's AI investments, supported by partnerships and cloud providers, rely on cheap and reliable power, which is now threatened. This new focus on data centers poses a risk to the Gulf's economic diversification efforts.

Hamas, the ruling group in Gaza, has made a rare public appeal to its key ally Iran, urging it to cease attacks on Gulf states. The call comes amidst escalating regional tensions, with Iran conducting retaliatory strikes that have impacted civilian infrastructure and resulted in casualties in the UAE, Kuwait, Oman, Saudi Arabia, and Bahrain. While affirming Iran's right to self-defense against the US and Israel, Hamas emphasized the need for regional cooperation and an immediate halt to the ongoing conflict. Hamas, a member of Iran's "axis of resistance," receives significant financial, military, and political support from Tehran, even as countries like Turkey and Qatar, also targeted by Iran, provide support to Hamas. The group expressed deep concern over the regional war and called for international intervention to end it.

On March 2, 2026, Iran's retaliatory strikes against US assets in the Gulf region entered their third day, escalating fears of a prolonged conflict. Explosions were reported in Dubai, Doha, and Kuwait, with Kuwaiti air defenses intercepting drones near residential areas. Iran stated the attacks were in response to ongoing US-Israeli strikes on Iran, targeting US military assets and impacting civilian areas across Gulf cities. Bahrain activated air raid alerts and closed a major bridge. Casualties have been reported in Kuwait, the UAE, and Qatar, while US-Israeli attacks have resulted in significant casualties in Iran and Israel. The US, Bahrain, Jordan, Kuwait, Qatar, Saudi Arabia, and the UAE jointly condemned Iran's attacks and affirmed their right to self-defense.

Multiple Gulf nations, including the UAE, Saudi Arabia, Qatar, and Kuwait, reported missile and drone attacks on Saturday. These attacks occurred despite an earlier apology from the Iranian president to Gulf countries, where he stated they would not be targeted unless strikes originated from their territory. Hours later, Iran declared its intent to continue strikes on sites within Gulf countries it considered to be at the disposal of its enemies. The UAE's president acknowledged the country was in "a period of war." Dubai authorities reported one death, a Pakistani national, resulting from debris from an aerial interception. Kuwait's national oil company announced a precautionary cut to production.

Israeli military forces launched a new wave of airstrikes on Tehran, Iran, on Saturday. In response, the Iranian president stated that Iran would cease attacks on neighboring countries. Despite this announcement, Qatar and Bahrain reported incoming fire. The reasons behind the Israeli strikes and the source of the reported fire in Qatar and Bahrain were not immediately clear. The events mark an escalation of tensions in the Middle East.

Dubai residents and tourists were shaken when Iranian missiles and drones approached the Gulf states over the weekend, triggering air defenses in the UAE, Qatar, Saudi Arabia, and Bahrain. Many initially mistook the interceptors for fireworks, as Dubai attempted to maintain its image of stability amidst regional conflict. While some residents received official alerts, others were caught off guard. Fires and smoke were reported at Dubai and Abu Dhabi airports due to drone debris, resulting in one death and several injuries. Smoke was also seen at the Jebel Ali port area in Dubai, one of the busiest ports in the Middle East. The incident challenged Dubai's long-held perception as a safe haven insulated from regional political turmoil.

The US military's approach to a potential war with Iran is unlikely to be successful due to its reliance on conventional tactics against an adversary employing asymmetric warfare. The US has consistently struggled to defeat opponents using unconventional methods, as seen in conflicts such as Vietnam and Afghanistan. In 2002, a war game simulation known as Millennium Challenge found that the US military was vulnerable to low-tech attacks, with a lieutenant general's team able to sink a US aircraft carrier within 10 minutes of starting the exercise. Iran has now used similar tactics, including ballistic missiles and drones, to undermine air defense systems in the Persian Gulf. The US underestimated Iran's capabilities before launching its military buildup, which is now paying off. This approach may repeat past American vulnerabilities.

Oil prices surged after the reported death of Iranian leader Ayatollah Ali Khamenei in US-Israeli air strikes, escalating conflict between the US, Israel, and Iran. The Strait of Hormuz, a critical oil transit route, experienced near standstill, impacting tanker traffic. This disruption raised concerns about supply shortages and increased import costs, particularly for Asian economies like China, India, Japan, and South Korea, which heavily rely on oil imports. Benchmark Brent crude jumped significantly, reflecting market fears of sustained supply disruption. Iran retaliated with attacks on US military bases in Bahrain, Kuwait, and Qatar, further escalating geopolitical tensions in the region.

Airspace closures across the Middle East, triggered by attacks between America/Israel and Iran, caused widespread flight disruptions, stranding or diverting hundreds of thousands of travelers. Several countries, including Israel, Qatar, Syria, Iran, Iraq, Kuwait, and Bahrain, closed their airspace, leading to the suspension of operations at key international airports in Dubai, Abu Dhabi, and Doha. Major airlines like Emirates, Qatar Airways, and Etihad cancelled thousands of flights, impacting an estimated 90,000 passengers daily passing through these hubs. Over 3,400 flights were cancelled across seven major Middle Eastern airports on Sunday. Some airports and landmarks in the region sustained damage, resulting in injuries and at least one reported death. The closure of Iranian airspace was extended until Tuesday morning.

On March 1, 2026, air traffic in the Middle East experienced significant disruption. According to Flightradar24, over 3,400 flights were canceled within the preceding 48 hours. The cancellations affected seven airports across the region. Airports impacted included those located in Qatar, the United Arab Emirates, and Bahrain. The reason for the widespread flight cancellations was not specified in the report.

A war launched by the US and Israel on Iran has rapidly escalated, spreading across the Middle East. On Saturday, Iran struck the Fairmont hotel in Dubai's Palm Jumeirah area, causing a fire and injuring four people. The attack on the Dubai hotel is part of a wider conflict that has sparked anxiety and concern throughout the region, with reports of explosions in Bahrain, Jordan, and Kuwait. The initial US-Israeli attack on Iran appears to be the catalyst for the escalating regional conflict. The reasons for the initial attack were not specified in this report.

On February 28, 2026, Iran confirmed retaliatory attacks on US assets located in Gulf Arab states, including Bahrain, Kuwait, Qatar, and the United Arab Emirates, following a joint US-Israeli attack on Iran. The Islamic Revolutionary Guard Corps (IRGC) claimed responsibility, stating that all US and Israeli military targets in the Middle East were struck. Bahrain reported an attack targeting the US Navy's 5th Fleet headquarters, while Kuwait experienced explosions near the US military's Central Command headquarters. Qatar's Defense Ministry stated it intercepted missiles before they reached Qatari territory. The UAE reported at least one death in Abu Dhabi after intercepting missiles launched from Iran.

Iran launched missiles and drones targeting Israel and US military installations in Bahrain, Kuwait, and Qatar in response to recent attacks by the US and Israel. The Iranian Foreign Ministry stated the action was in defense of the homeland. The UAE and Iraq closed their airspace, and shrapnel from an Iranian missile killed one person in the UAE. Israel issued a nationwide warning and activated its missile defense systems to intercept incoming projectiles. There were initially few reports of damage or injuries in Israel.

Following reported strikes in Iran by the US and Israel, Australia's National Security Committee is convening. Foreign Minister Penny Wong stated Australia was not informed in advance of the strikes and has updated travel advice for Israel, Lebanon, Bahrain, Kuwait, Qatar, and the United Arab Emirates. A crisis center has been activated to provide consular support to Australians in the region, and a registration portal has opened for Australians in Iran and Israel. Wong emphasized Iran's destabilizing role in the region and stated that Australia did not participate in the strikes. The Australian government advises Australians in the affected region to follow travel advice and seek safety, acknowledging potential difficulties with repatriation due to airspace closures.

Following Israeli and US airstrikes on Iran, the Australian Department of Foreign Affairs (Dfat) has warned Australians of potential "reprisal attacks and further escalation" across the Middle East. Dfat updated its Smartraveller website, advising against travel to Iran and urging those in the country to leave if safe, citing the risk of military conflict and potential airspace closures impacting global flights. Australians remaining in Iran are advised to prepare to shelter in place with adequate supplies. The Australian embassy's operations in Iran are suspended. Prior to the attacks, Australia had already advised citizens in Israel and Lebanon to consider leaving and withdrew dependents of officials from Israel and Lebanon due to the deteriorating security situation.