Iran escalated the conflict beyond conventional military operations on March 10 when it formally declared US and Israeli economic and banking interests as legitimate targets. The declaration, issued through official channels, signaled Tehran’s intent to expand the war into economic and financial domains — a shift that threatened to inflict damage on the global economy far exceeding the direct costs of military operations.
The Declaration
Iran’s statement identified US and Israeli “economic, banking, and commercial interests” as targets, without specifying precisely which assets or infrastructure would be attacked. The deliberate ambiguity appeared designed to maximize uncertainty and force both nations — and their economic partners worldwide — to assess their exposure.
The declaration followed a pattern of gradual escalation. In the first days of the conflict, Iran’s retaliatory strikes focused on military targets: US bases, Israeli military positions, and allied defense installations. The expansion to economic targets indicated that Tehran was broadening its concept of what constituted a legitimate war target.
The Strait of Hormuz
The most significant economic weapon at Iran’s disposal remained the Strait of Hormuz. Approximately 20 percent of global daily oil consumption passes through the narrow waterway, which at its narrowest point is just 33 kilometers wide.
Iran had long threatened to close or mine the strait in the event of war, and its naval capabilities — including mines, small attack boats, and anti-ship missiles — made disruption feasible even if a complete closure was difficult to sustain against US naval superiority.
Any significant disruption to Hormuz traffic would affect oil and LNG shipments to Asia, Europe, and the Americas. The mere threat of disruption had already contributed to sharp increases in energy prices since February 28, with the formal economic warfare declaration adding further upward pressure.
Financial Infrastructure at Risk
The declaration raised particular concern about potential attacks on financial infrastructure. Modern economies depend on interconnected systems for banking, trading, and payment processing. While Iran’s conventional military could not physically reach US financial centers, the country’s cyber capabilities — developed over years and tested in previous operations against Saudi Aramco and other targets — represented a credible threat to digital financial systems.
Iran’s cyber warfare units, linked to the IRGC, have previously demonstrated the ability to conduct destructive attacks against financial and energy sector targets. The formal declaration of economic interests as targets could provide political authorization for operations that had previously remained below the threshold of official policy.
Insurance and Shipping
The economic warfare declaration had immediate practical effects on global shipping. Insurance premiums for vessels transiting the Persian Gulf had already surged since the outbreak of hostilities. The explicit targeting of economic interests prompted several major shipping companies to reroute vessels away from the Gulf entirely, adding days to transit times and further inflating costs.
Force majeure declarations by energy companies, which had begun on March 10, accelerated as the economic warfare posture made compliance with existing supply contracts increasingly untenable. The legal and commercial cascading effects of these declarations affected downstream industries worldwide.
The Sanctions Paradox
Iran’s economy had operated under severe US and international sanctions for decades. The sanctions regime, which targeted Iranian banking, oil exports, and individual entities, had been designed to limit Iran’s economic capacity and restrict its ability to fund military programs.
The irony of the economic warfare declaration was that Iran — an economy already largely disconnected from the US financial system by sanctions — was now threatening to attack the very system from which it had been excluded. For Tehran, the calculation was that even limited disruption to US and Israeli economic interests would impose costs disproportionate to the effort required.
Impact on Gulf Economies
The Gulf Cooperation Council states faced particular exposure. Their economies were deeply integrated with both US and Iranian economic spheres, and the declaration of economic interests as targets threatened to place Gulf financial institutions, ports, and energy infrastructure in an untenable position.
UAE stock exchanges had already closed. QatarEnergy had halted LNG production. The economic warfare declaration raised the possibility of further disruptions to Gulf commercial activity, threatening the economic foundations that decades of development had built.
Philippines and Beyond
The ripple effects reached economies with no direct involvement in the conflict. The Philippines — which had already implemented a four-day work week and reduced car travel to cope with fuel price increases — represented one of many countries experiencing the secondary economic consequences of the war.
Remittances from Gulf-based Filipino workers, a critical component of the Philippine economy, faced disruption as conflict conditions made banking transfers more difficult and evacuation flights removed workers from the region.
The Cost Calculation
Iran’s economic warfare strategy reflected a recognition of asymmetry. The US military budget dwarfed Iran’s by orders of magnitude, and the air campaign had already degraded significant Iranian military infrastructure. But in the economic domain, Iran possessed leverage through geography (Hormuz), cyber capabilities, and the interconnectedness of the global economy.
The question facing policymakers in Washington, Tel Aviv, and Gulf capitals was whether Iran could inflict sufficient economic pain to alter the political calculus of the war — not by winning on the battlefield, but by making the economic costs of continued conflict intolerable.