Iran’s response to Israel is a choice between revenge and survival

Iran’s powerful proxy network across the Middle East is being dealt blow after blow from Israel, which has dramatically escalated fighting with Lebanese militia group Hezbollah and on Friday killed its long-time leader, Hassan Nasrallah in a series of airstrikes on Beirut.

Hezbollah is Iran’s most important strategic ally, operating as both a militant and political organization that Tehran has funded and nurtured since its inception in 1982 to become what is widely seen as the most heavily-armed non-state group in the world.

Beginning with a series of sabotage attacks earlier in September that led to the explosion of thousands of Hezbollah pagers, Israel has gone from disabling massive swathes of the group’s communications to taking out its most powerful leader, as well as several other senior commanders.

Iran’s generals and its supreme leader Ayatollah Ali Khamenei have pledged revenge, but their actions and language suggest a more measured response so far. An all-out war between Israel and Iran would be devastating to the entire region, but would be particularly damaging to Iran, whose economy is already in dire condition and whose oil facilities could be particularly vulnerable to attacks.

Notably, oil prices — which are typically highly sensitive to threats to supply — are still hovering near $70 a barrel for international benchmark Brent crude, suggesting markets also predict a conservative response from Iran, one of OPEC largest oil producers.

“⁠In the last two weeks, Israel’s decisive blows to Hezbollah have in essence gutted the crown jewel of Iran’s regional proxy network,” Behnam ben Taleblu, a senior fellow at the Foundation for Defense of Democracies, told CNBC.

“Iran’s response options aren’t good. If the Islamic Republic gets more directly involved there will be a direct target on its back. To that end, survival beats out revenge, especially in a war of attrition.”

Following the assassination of former Hamas leader Ismail Haniyeh in Tehran on July 31, Khamenei vowed a “blood for blood” response, which has so far yet to happen. But the tone following Nasrallah’s killing was markedly different — the Iranian leader made clear that it would be up to Hezbollah itself to choose its response.

“All the Resistance forces in the region stand with and support Hezbollah,” Khamenei said on the X social media platform on Saturday. “The Resistance forces will determine the fate of this region with the honorable Hezbollah leading the way.”