From Singapore: The Middle East has entered a new and dangerous chapter. Iranian ballistic missiles struck the Israeli city of Beit Shemesh on Sunday, 30 kilometres west of Jerusalem, killing at least nine people and wounding more than 40 in what is one of the deadliest direct hits on Israeli soil since Iran began its retaliatory campaign. The strike destroyed a synagogue and collapsed a bomb shelter, according to the Sydney Morning Herald and multiple international outlets. For Australian families watching from abroad, the images are confronting. For energy markets, the numbers behind this conflict are even more so.
The chain of events began on 28 February when the United States and Israel launched a joint military operation against Iran codenamed Operation Epic Fury by the Pentagon and Roaring Lion by the Israeli Defence Forces. The coordinated attack targeted Iranian military infrastructure, nuclear facilities, and regime leadership, following a conclusion in Washington and Jerusalem that diplomacy had been exhausted and that a nuclear-armed Iran posed an unacceptable security threat. The strikes killed Ayatollah Ali Khamenei, Iran's supreme leader for nearly four decades, throwing the country into uncertainty and sparking a war that could draw in much of the Middle East.
Tehran's response was swift and sweeping. On the morning of 1 March, Iran launched missiles and drones against Israel, the UAE, Qatar, Kuwait, Bahrain, Jordan, and Saudi Arabia. The scale of the retaliation against the UAE alone was staggering: Iran launched 165 ballistic missiles at the UAE, of which 152 were destroyed by air defences and 13 fell into the sea; a further two cruise missiles were also detected and destroyed, and Iran launched 541 drones, of which 506 were intercepted, while 35 fell within the country's territory.
The human toll is still being counted. Preliminary figures show 201 dead in Iran, at least nine in Israel, and three US soldiers killed. Among the Iranian dead are at least 148 people killed in an attack on an elementary girls' school in the southern city of Minab, a detail that has drawn sharp international condemnation. Iran's Foreign Ministry spokesperson Esmail Baghaei told NPR that children were still under the rubble.
Dubai's Reputation Under Fire
For Australians, the conflict is not an abstraction. Hundreds are stranded across the UAE after the country slammed its airspace shut on Saturday. Among those caught in the chaos is Carina Rossi, a senior editor at nine.com.au, who was staying at Atlantis The Palm in Dubai when debris fell from the sky into the hotel pool. Residential areas of Dubai close to the Burj Khalifa, Dubai Marina, and the Dubai Palm were hit by strikes, setting the Fairmont The Palm hotel on fire and causing four injuries. An intercepted Iranian drone reportedly caused a minor fire on the Burj Al Arab's outer facade, while one of the berths at Dubai's Jebel Ali Port caught fire due to debris from an aerial interception.
Australian Olympic swimmer Stephanie Rice, who lives in Dubai, asked publicly for prayers. The city's very identity as a safe, cosmopolitan haven is now in question. As Cinzia Bianco of the European Council on Foreign Relations observed, Dubai's appeal depended entirely on its reputation as a secure oasis. The conflict led to the closure of key hub airports in Dubai, Abu Dhabi, and Doha, and the cancellation of more than 1,800 flights by major Middle Eastern airlines, according to aviation analytics company Cirium. Gulf carriers Emirates and Etihad cancelled 38 per cent and 30 per cent of their flights respectively on Saturday, while Qatar Airways suspended all flights from Doha with 41 per cent of all flights cancelled.
The Strait of Hormuz: The Number That Terrifies Markets
The trade implications for Australia are direct. Iran has effectively threatened to close the Strait of Hormuz, the narrow waterway through which roughly a fifth of the world's seaborne oil passes every day. An EU official told Reuters that vessels crossing the strait had been receiving transmissions from Iran's Islamic Revolutionary Guard Corps warning that no ship was allowed to pass, though Iran had not officially closed the strait; several tanker owners had already suspended shipments through the waterway.
About three-quarters of the crude that transits Hormuz goes to China, India, Japan, and South Korea, and China alone receives half of its crude imports from the strait. Australia is not a major Hormuz oil importer, but the knock-on effects for our largest trading partners would arrive quickly. Higher Chinese manufacturing costs mean lower demand for Australian iron ore and coal. Higher LNG spot prices could benefit Australian gas exporters in the short term, but sustained supply disruption is a net negative for an economy already grappling with domestic inflationary pressure.
Swiss bank Lombard Odier estimates that a temporary spike in oil prices to $100 per barrel or beyond is plausible, and global LNG prices would also be affected if Iran moves to block the strait. Ali Vaez, director of the Iran project at the International Crisis Group, warned that closure of the Strait of Hormuz would disrupt roughly a fifth of globally traded oil overnight, with prices set to "gap violently upward on fear alone." On Sunday, an oil tanker was struck off the coast of Oman, signalling a clear escalation from military targets to energy assets.
The Legitimacy Debate the West Cannot Ignore
It would be too easy to frame this conflict purely in terms of Iranian aggression. The harder questions concern the origins of the operation. Tehran said the strikes took place while Iran and the United States were engaged in a diplomatic process, and that it had entered negotiations despite doubts about US and Israeli intentions in order to demonstrate its commitment to avoiding war. Criticism has mounted against Washington for taking part in the attacks while still engaged in nuclear negotiations with Tehran.
Iran's Foreign Ministry spokesperson told NPR on Sunday that his country would continue to fight what it described as "foreign aggression" and called the conflict "an unjust war imposed on our nation." United Nations Secretary-General António Guterres condemned both the US-Israeli attacks and Iran's retaliation, stating that "the use of force by the United States and Israel against Iran, and the subsequent retaliation by Iran across the region, undermine international peace and security." These are not fringe positions. They reflect concerns shared across the United Nations membership about the rules-based international order that Australia has long championed as a middle power.
At the same time, the strategic logic behind the operation should not be dismissed. Khamenei's rule was marked by harsh repression of protest movements, with human rights groups reporting that security forces killed tens of thousands of demonstrators during successive crackdowns, including the large-scale protests of early 2026. The argument that a nuclear-armed Iran posed a genuine and imminent threat to regional stability carries real weight for US allies in the Gulf and for Israel.
What Canberra Must Watch
Across the region, the trend is unmistakable. The conflict is widening, not narrowing. On 1 March, President Trump announced that the US had agreed to continue negotiations with Iran, a signal that a diplomatic off-ramp may still exist, even as strikes continue. But Iran's Foreign Minister Abbas Araghchi told Al Jazeera that the killing of Khamenei would "make the confrontation more complex and dangerous", adding that Iran had "no restrictions or limits" in defending itself.
For Australian policymakers, the immediate concerns are consular: getting stranded nationals home from Dubai and other affected cities. The longer game involves preparing for an energy price shock that would feed directly into household costs, just as the Reserve Bank of Australia was charting a course toward interest rate relief. A sustained oil shock would complicate that calculus considerably.
The lesson from this crisis is that geopolitical stability in the Indo-Pacific and Middle East is not a background condition for Australian prosperity; it is a precondition. Reasonable people can and do disagree about whether the US-Israeli operation was justified, proportionate, or strategically wise. What is harder to argue against is the need for Australia to maintain robust diplomatic engagement across the region, invest in genuine energy diversification at home, and insist, as a matter of national interest, that the international frameworks designed to prevent exactly this kind of cascading conflict are worth defending, not merely invoking after the fact.