The military and diplomatic standoff between the United States and Iran has intensified ahead of the UN General Assembly. Iran's military has warned that any new US action would trigger sustained attacks on American facilities and interests in the Middle East, while Washington continues to press Tehran to reach an agreement and threatens further action against Iran's economy or leadership. The escalation is raising fresh concerns about shipping through the Strait of Hormuz, global crude supplies and energy prices.
Washington and Tehran trade threats before the UN assembly
The US president said recently that Washington could seek to destroy Iran's economy, and potentially target its leadership, if Tehran refused to accept an agreement. He also said he had not ruled out meeting Iranian President Masoud Pezeshkian during this week's UN General Assembly, although no decision had been made on whether to expand military operations.
Iran's Khatam al-Anbiya Central Headquarters said intelligence indicated that the United States and its allies could be preparing a new large-scale strike. It warned that regional countries supporting such an operation could be treated as participants in the conflict. If the US takes military action against Iran, American positions and interests across the Middle East would become retaliation targets, it said.
The latest exchange of threats comes after seven months of conflict. A memorandum of understanding reached in June has expired, while an Iranian delegation is due to travel to New York for the UN General Assembly this week. Pezeshkian is also expected to meet several foreign leaders during the gathering. Whether diplomatic channels can reopen has become a key variable for markets assessing the outlook for energy supplies.
Houthi attack raises fresh Gulf security concerns
The US State Department has issued a security alert urging American citizens to prepare for a sudden escalation in the Middle East, including possible flight cancellations and airspace closures.
The warning came after the Iran-backed Houthi movement claimed on Saturday that it had launched a missile and drone attack on Riyadh, Saudi Arabia's capital. It was the first time since the conflict escalated in July that air-raid sirens had sounded in the city. Saudi Arabia said its air-defence systems intercepted and destroyed a ballistic missile, with no reported casualties or property damage.
Major General Turki al-Malki, a spokesman for the Saudi-led coalition, said the Houthis had also attempted to target civilians and infrastructure in several parts of Saudi Arabia, but that the attacks were intercepted by Saudi air defences. Continued attacks could affect tanker routes, port facilities, and insurance and freight costs across the Gulf.
Oil prices ease, but the supply gap remains
International oil prices have fallen in recent sessions despite the widening regional conflict, as traders bet that energy shipments from Saudi Arabia and other producers can gradually recover. In the latest trading session, Brent crude futures fell 1.7% to $102.15 a barrel, while West Texas Intermediate futures declined 1.8% to $98.46.
Eurasia Group's analysis team said prices could remain elevated even if the US makes progress in facilitating crude shipments through the Strait of Hormuz. Additional supply would not be enough to fully close the wider market shortfall, the team said, forecasting that Brent could trade between $90 and $110 a barrel for the remainder of the year.
Iran has previously said it would not reopen the Strait of Hormuz until the United States fulfils the commitments set out in the June memorandum. Those commitments include lifting the maritime blockade of Iranian ports, easing sanctions, unfreezing Iranian assets and ending US military threats.
Hormuz traffic remains the key market variable
Iran's leadership continues to emphasise resistance, while disagreements remain at home over military operations and diplomatic negotiations. Iranian parliamentary speaker Mohammad Bagher Ghalibaf said Iran needed to pursue fighting and negotiations at the same time to change the pressure on its adversaries. Diplomatic efforts would be more effective only when Iran held an advantage on the battlefield, he said.
For energy markets, the next phase will depend not only on oilfield output but also on the level of traffic through the Strait of Hormuz, the risk of attacks on tankers and whether Gulf states can maintain stable exports. If Iran continues to affect shipping through regional armed groups and actions targeting tankers, crude prices could retain support from disruption risks. A resumption of diplomatic contacts and a return to normal shipping conditions would instead leave prices vulnerable to further declines. Markets are watching the meeting schedule at the UN General Assembly, any expansion of regional attacks and Washington's next move toward Tehran.