The Middle East is again at a critical juncture, and the ramifications of renewed U.S. military strikes against Iran could go far beyond traditional war fronts. The situation in the Persian Gulf, Saudi Arabia, Yemen and the Strait of Hormuz is more and more a battle of energy security, international trade, military deterrence and economic stability of some of the world's biggest economies.

The fighting that erupted on Feb. 28 when the U.S. and Israel attacked Iran is now in a volatile stage. While diplomatic efforts are ongoing in Tehran, strategic installations are being fortified, military pressure is being applied to Washington, and attacks on the maritime are escalating. The threat of further big attacks is no longer about if, but when. It's about how many countries, industries and international supply chains will become embroiled in its implications.

Iran seems intent on communicating that an economically affordable victory is not possible with superior American military prowess. Reports indicate that Tehran is gearing up for a long conflict over nuclear installations at Natanz and Pickaxe Mountain and airport and port preparations, rather than a brief military encounter.

The preparations have two functions. They make it harder for any potential American operations and send messages to neighboring governments that they could be subject to attacks if they allow the attacks from their own territory. But Iran's situation is marked with significant weaknesses. It continues to be undermined by sanctions, investment failures and a lack of foreign financing, as well as the vast expenditure on military preparedness.

The first risk to the global economy is the Strait of Hormuz. The strategic waterway is used by around 20% of the world's petroleum and LNG trade in normal circumstances. Disruption has an impact not only on regional exporters, but refineries, shipping companies, industrial manufacturers and consumers in Asia and Europe.

Recent Sea changes are an example of the seriousness of the situation. During the two weeks before October 11, there were reports of 24 commercial vessels attacked. Oil flows has been reported to have dropped back to about 2.9 million bpd through Hormuz on October 11 from a high of 15.5 million bpd in September.

This is approximately 81% less than the reported reference points, but may vary significantly day by day. The economic impact is clear: even short interruptions lead to a shortage of available tankers, higher insurance rates and a shortage of refiners to meet demand for alternative supplies.

On Tuesday, Oct. 14, Brent crude was quoted around $106.60 per barrel, and American West Texas Intermediate (WTI) was close to $95.79. These prices don't just reflect reduced production, but the extra expense in transporting oil to increasingly perilous waters.

The shipping industry is already coming to terms with unprecedented distortions. Some supertankers reported earnings of around $805,000 a day on October 9. Such rates represent, in effect, a transfer of huge costs across the global energy system from geopolitical risk without the need to destroy a single major oilfield.

Saudi Arabia is in a very hard strategic position. The kingdom should safeguard its oil facilities, continue to build trust in investment climate and be prepared to deal with new Houthis' assaults. Emphasizing on the commercial pillars of its economic diversification programme, the reported strikes on the airport infrastructure and energy facilities in Riyadh will endanger the very bases of the company's economic diversification plans.

Crown Prince Mohammed bin Salman faces more than just a military response. The success of Saudi Arabia's Vision 2030 relies on the aviation, tourism, logistics and industrial sectors, as well as international capital. If attacks continue, it will increase operating expenses and might erode investor confidence in projects focused on decreasing reliance on petroleum income.

The crisis in Yemen adds another risk factor. Bab el-Mandeb strait is the link between the Red Sea and the Gulf of Aden and the entrance to the Suez Canal. A combination of simultaneous disruption at both Bab el-Mandeb and Hormuz would be particularly devastating as it would impact both Gulf energy exports and the shipping route between Asian manufacturing centres and European consumers.

The role of technology is also emerging and growing. Iranian threats to the region's data centres and subsea communications cables add to the threats on banking networks, cloud systems, telecommunications and international payment systems. The world's nations that are not directly involved in the conflict would have significant economic losses even if the fighting was limited.

There are complexities in the military equation with domestic politics in the United States. If major strikes are not to happen before the Nov. 3 midterm elections, as President Donald Trump implied, it doesn't mean they cannot escalate later. Iranian defense and American military readiness suggest the battle is far from over.

Meanwhile, the series of talks are being impeded by disagreements over sanctions, nuclear limitations and the reopening of the Hormuz Strait. Tehran wants assurances and economic moving-out, Washington wants restrictions on Iran's capabilities. Both sides know that concessions under military pressure may have significant domestic political repercussions.

This is another potential destabilising factor; Britain's claims that Iran was involved in the alleged RAF Fairford plot. Iran refuses responsibility and the investigation hasn't found grounds for Britain's military involvement. However, an authenticated strike on Western military targets outside the Middle East would significantly expand both the diplomatic and security agenda.

There is substantial economic exposure in India. The higher crude prices will lead to higher import costs for the country, affect refining margins, and could raise inflation management challenges. If freight and insurance fees continue to increase, it will also impact Indian exporters, especially those relying on shipping routes between India and Europe, as well as between India and the Gulf states.

The key to India's strategic strength is having multiple energy partnership options and significant refining capacity as well as engagement with rival geopolitical groupings. New Delhi must not only retain these benefits but also not rely on the politics of any one power.

The situation is sadder than ever at the international level. China relies on imported energy, Europe is exposed to fuel price fluctuations, and the developing economies are hit by high transportation costs, a weak currency and high financing costs.

The underlying issue is whether military escalation can achieve strategic goals without causing any of the key players economic instability which they ultimately require. Iran has not the conventional means to defeat the United States, but it can inflict significant costs on the U.S. through its ability to disrupt the seas and retaliate in the region.