The Riyalpolitik 5
The Riyalpolitik 5 highlights five recent geo-economic developments across the Middle East that we’re keeping an eye on.
1 Source of Friction: Middle East Conflict Hits Oil & Inflation Risks: Escalating U.S. and Israeli airstrikes on Iran, including reported targeting of senior leadership and key military infrastructure, have sharply increased energy market tension, with Brent crude jumping toward ~$80-plus a barrel as of Monday and trading through the Strait of Hormuz — a chokepoint for ~20 % of global oil — effectively curtailed as shipping hubs avoid risk.
Why we care: Even before broader disruption of regional oil flows, markets are pricing in significant risk premiums, with analysts warning prices could top $100 a barrel if the strait remains inaccessible and supply drops (to date: Qatari, Saudi, and Israeli oil and gas fields have been disrupted with some production curtailed) — a dynamic that could add materially to global inflation and complicate the macro outlook for central banks and governments alike. As inflation expectations rise, not only are fuel costs set to climb at the consumer level, but broader cost pressures could erode purchasing power and slow growth, raising the stakes for policymakers in Washington, Riyadh, Beijing and beyond.
1 Policy Shift: From Maximum Pressure to Operation Epic Fury: One of the more significant policy shifts on Iran erupted over the weekend as the U.S. and Israel abandoned years of more limited, surgical action across the military, economic, and cyber domains in favor of direct, large-scale military action against the Iranian regime, killing Supreme Leader Ali Khamenei and dozens of senior military commanders.
Why we care: Dubbed Operation Epic Fury, the joint strike represents a shift in U.S. policy toward decapitation of the regime and the destruction of both Iran’s nuclear and military infrastructure. Following the inconclusive end to indirect nuclear talks in Geneva earlier in February, in which Washington demanded the total dismantlement of Iran’s program and argued for zero enrichment, President Trump authorized a massive military operation against the regime, which could create permissive conditions for a new political reality in Iran. The strikes – which are ongoing and which we are tracking closely across domains – are another nail in the coffin of the Axis of Resistance deterrence paradigm. Nonetheless, a successful decapitation strike against Iran could likely prove more difficult than the operation that captured former Venezuelan President Nicolás Maduro due to Iran’s superior military capabilities, larger geographical size, deeper institutionalization of the regime, and stronger ability to retaliate asymmetrically, including in the cyber domain and through terrorist attacks.
1 Big Deal: Hapag-Lloyd to Acquire ZIM Shipping in $4.2 billion deal
Germany’s Hapag-Lloyd agreed to acquire Israel’s ZIM Integrated Shipping Services for about $4.2 billion, offering $35 per share — a 58% premium that elevates Hapag-Lloyd into the world’s fifth-largest container carrier with a fleet of 400+ ships and expanded global routes. Part of ZIM’s business that serves Israeli trade lanes will be carved out and sold to Israeli private equity firm FIMI to satisfy national security concerns. These concerns stemming from Hapag-Lloyd’s shareholder base, which include major Gulf sovereign investors such as Qatar Holding and Saudi Arabia’s PIF, embedding regional state capital within one of Europe’s most strategic shipping groups amid heightened Red Sea and Strait of Hormuz volatility.
Why we care: The deal is a major consolidation in global liner shipping at a time of elevated logistical strain, geopolitical risk, and supply-chain reconfiguration. It also underscores how sovereign and private capital are reshaping control of maritime infrastructure. The deal’s structure, which splits domestic Israeli operations from the global network, reflects how national security considerations are being baked into cross-border acquisitions in strategic sectors.
1 Under the Radar Development: Modi visits Israel
Last week, India’s Prime Minister Narendra Modi visited Israel for the first time since 2017 for a two-day visit focused on deepening and expanding Israeli-Indian strategic relations.
Why we care: The visit, coming just before the joint U.S.-Israeli attacks on Iran, reinforces India’s efforts to cultivate ties across the Middle East and with the West in support of its broader security and economic ambitions. New Delhi and Jerusalem committed to finalizing a free trade agreement and deepening cooperation across a range of sectors, from AI and quantum computing to agriculture and defense. At a moment when Israel finds itself increasingly isolated on the world stage, India’s embrace is significant, and carries broader regional implications, such as the viability of the India-Europe-Middle East Corridor (IMEC).
1 Fun Thing: Jews in Israel and worldwide celebrate Purim
As tensions between Israel and Iran have intensified, Jews in Israel and around the world marked Purim. The festive holiday recalls the ancient story of survival in Persia more than 2,500 years ago, a narrative whose themes of threat and resilience felt especially resonant for many this year.
Why we care: Purim tells the story of Jewish survival under Persian rule, a narrative recited annually for millennia. This year, its themes of existential threat, resilience, and reversal of fortune carried unmistakable contemporary resonance, as Israelis celebrated from bomb shelters amid missile fire from the territory of the modern Iranian state. In the Middle East, history is rarely distant — and ancient storylines often echo in present-day geopolitics. The overlap between collective memory and real-time conflict underscores how identity, strategy, and national psychology in the region are often shaped as much by historical consciousness as by immediate military calculus.