Israel Weighs Response to Iran Attack

Israel Weighs Response to Iran Attack 

Context

Saturday night local time, Iran launched an unprecedented attack on Israel, sending roughly 170 drones, over 30 cruise missiles, and 120 ballistic missiles at Israel. The attack was in response to an alleged Israeli airstrike near an Iranian consulate in Syria on April 1, which killed top Islamic Revolutionary Guard Corps members (the IRGC is designated a foreign terrorist organization by the US State Department). Saturday’s attack originated from Iran as well as its proxies in Yemen, Syria, and Iraq. It marks the first instance of Iran instigating an attack from its own territory.

US, British, French, and Jordanian forces joined Israel in its defense response, shooting down the vast majority of drones and missiles before they entered Israeli airspace. Israel reported minor damage to a military base in the south and no deaths. Early reports suggested Saudi Arabia also participated in Israel’s defense, however, this account has been disputed by Saudi sources in Al Arabiya, the Kingdom’s state-owned newspaper.

Following the attack, Iran’s mission to the United Nations posted to X that Iran’s military action was over, but warned that additional measures could be taken if Israel retaliates: “The matter can be deemed concluded. However, should the Israeli regime make another mistake, Iran’s response will be considerably more severe. It is a conflict between Iran and the rogue Israeli regime, from which the U.S. MUST STAY AWAY!”

Israel’s war cabinet is now weighing its response. The Biden administration has urged Israel to show restraint in its response and that the US will not participate in any Israeli counterattacks against Iran. Gen. Herzi Halevi, chief of staff of the Israel Defense Forces, however, said Monday that the attacks will “be answered with a retaliation.” CNN reports that possible military options being considered include an attack on an Iranian facility that would “send a message, but would avoid causing casualties,” according to an Israeli official. 

Why it matters

Iran’s attack and the specter of Israel’s response have security and economic risks both regionally and globally.

The risk of regional escalation looms. As Israel weighs its response, regional tensions heighten the possibility of escalation. IRGC-aligned groups in Iraq, Syria, and Lebanon who have strong ties with Iran, will likely join future responses. Neighboring countries are being drawn into the conflict and long-standing rivalries in the region fuel the risk of wider war in the Middle East.

Regional escalation risks pulling the US and other allies into the conflict. The US helped defend Israel against the attack, shooting down over 80 attack drones and at least six ballistic missiles. The active US and ally involvement raises the risk that they will suffer losses—even if merely a miscalculation or accident—and get embroiled in the conflict. An all-out war between Iran and Israel would also obligate the US to the conflict. While Biden was adamant that the US would not participate in any offensive operations against Iran, the risk that the US gets dragged in involuntarily is rising.

Israel’s defensive capabilities proved far superior to Iran’s attack. Israel’s entire aerial defensive array—the Iron Dome, David’s Sling, Arrow 3, and its broader ally defense coordination—were on clear display, successfully intercepting 99% of the projectiles, according to its military. US National Security Communications Adviser John Kirby described Iran’s attack as an “embarrassing failure.” He added: “Iran’s vaunted missile program, something it has used to threaten Israel and the region, proved to be far less effective. Israel’s defenses, on the other hand, proved even better than many had long assumed.”

But the successful defense came with a high price tag. Some analysts estimate costs between USD 2-3 billion in just one night. Extended regional conflict would add up quickly, draining defense budgets and driving investment from the region—a high toll on local economies already struggling with high inflation and global economic headwinds.

The attack also highlights the growing role of drones in modern warfare. Iran’s attack represented the single largest drone strike in history, but it is unlikely to be the last. Drones are relatively cheap to produce and are rapidly proliferating. Iran is supplying these killer drones to Russia for its war in Ukraine.

The economic costs are global. The initial economic impacts of Iran’s attack have been mixed. On Monday, global markets fell, with the Dow dropping 0.65%, the S&P500 falling 1.2%, and the Nasdaq falling 1.8%. Yet while turmoil in the oil-rich Middle East typically raises oil prices, the price of Brent crude dipped on Monday. Looking ahead, a further escalation or retaliation from Israel has the potential to disrupt regional oil supply and global trade. A potential flashpoint is the Strait of Hormuz, a critical waterway for nearly 20% of the world’s oil supply—including almost 50% of China’s oil. IRGC seizure over the weekend of an Israeli-affiliated container ship in the Strait reinforces the threat to oil prices and trade stability.

Regional escalation could reignite boycotts of Western businesses. Since the start of the Gaza war, Western brands in the Middle East have felt the impact of widespread grassroots boycotts. Despite many Western companies pledging aid to Gaza, the boycotts are a way to make voices heard. Social media and disinformation have fueled them and are having a lasting impact. If the conflict spreads, its likely to ignite a new round of business boycotts.

What we’re watching

What retaliation will Israel pursue? Amid Iranian warnings against retaliation and President Biden hoping to avoid an economically and politically costly war in an election year, Israel’s challenge is to de-escalate while showing strength. But its war cabinet, comprised of only three voting members—Prime Minister Netanyahu, his rival and former head of Israel’s military, Benny Gantz, and Defense Minister Yoav Gallant—seems uncertain of its approach. After initial meetings, the cabinet appeared determined to respond but was undecided on how or when. Gantz, who has been pushing for a swift response, said that Israel will “exact a price from Iran in a way and time that suits us.” Netanyahu said that in response to Iran’s attack, “We have determined a clear principle: whoever harms us, we will harm them.”

What will be the impact on the ongoing conflict in Gaza? The weekend attack delayed a ground offensive on Rafah that was originally slated to commence on Monday in the Gazan border city and Hamas stronghold where it is believed that 133 hostages are being held captive. The Biden administration is likely to continue to exert pressure on Israel to show restraint in Rafah, where over a million Palestinian civilians have taken refuge.

How will businesses respond? The unprecedented attack risks devolving into tit-for-tat retaliation, drawing in neighbors, sparking wider war in the Middle East, and disrupting global oil and trade routes. Businesses need to continue to monitor the risk of escalation, scenario plan, and review their operational impacts. Employee and crisis communication plans should be in place. Brands should also remain vigilant with narratives used in the region—focusing on protecting civilian lives—and be aware of the sensitivities of diverse stakeholders among their regional and global customers, employees, and partners. 

For additional information, reach out to EGAThoughtLeadership@edelmanEGA.com