U.S.-Iran Tensions and the Risk of Regional Escalation
Key Insights:
Tensions between the United States and Iran show a convergence of military posturing, political brinkmanship, and unresolved regional disputes, increasing the risk of miscalculation and wider conflict. The deployment of U.S. forces and Iran’s heightened missile and military activity have reinforced mutual deterrence. For businesses and travelers, the current environment signals growing operational, security, and economic risks linked to potential disruption across critical transport, energy corridors and overall business travel to the Middle East.
Key Events:
January 27-29, 2026: Iran’s Islamic Revolutionary Guard Corps announced naval live-fire drills in and around the strategic Strait of Hormuz amid rising tensions with the United States.
February 3, 2026: A U.S. fighter jet shot down an Iranian Shahed drone that approached the USS Abraham Lincoln in the Arabian Sea, as part of a significant U.S. naval buildup in the region.
February 3, 2026: Six Iranian gunboats attempted to stop the U.S.-flagged tanker Stena Imperative in the Strait of Hormuz before it was escorted onward by a U.S. warship, signalling increasing maritime flashpoints.
February 4, 2026: Iranian officials announced Washington and Tehran will meet in Muscat for nuclear negotiations after prior uncertainty about the venue and focus of the talks.
February 4, 2026: Oil markets reacted to reports that nuclear talks between the U.S. and Iran would proceed in Oman, easing some concerns about potential conflict disrupting energy supply.
Analysis:
Tensions between the U.S. and Iran are continuing to spike, driven by the combination of military posturing, political confrontation, and deepening mistrust between the two governments. The deployment of additional U.S. naval and air assets to the region has reinforced perceptions in Tehran that Washington is preparing for potential military action, while U.S. officials have presented these moves as a deterrence in response to Iran’s regional behavior, including perceived threats to international security, and the recent crackdown on protests across Iran that reportedly killed thousands.
The U.S. military build up consists of carrier strike groups, amphibious assault ships, fighter and bomber wings, and additional air-defense assets have been deployed to the Arabian Gulf, Arabian Sea, and surrounding waters to deter Iranian aggression and protect commercial shipping.
The scale of these deployments is the largest U.S. military presence in the Middle East since previous confrontations with Iran, illustrating Washington’s intent to impose a credible threat of retaliation should Iran escalate further.
On the other hand, despite years of sanctions and economic pressure, Iran retains a diverse arsenal of ballistic and cruise missiles, medium-range systems, and an expanding drone program.
Developments such as the Qassem Bassir medium-range ballistic missile, with a potential range exceeding 1,200 km emphasize its capacity to threaten U.S. bases and other military assets if conflict erupts.
Furthermore, Tehran’s extensive network of proxy forces across the region such as in Iraq and Yemen, to include Hezbollah in Lebanon, Kata’ib Hizbollah in Iraq, and the Houthi movement in Yemen, extends the battlefield beyond direct U.S.-Iran clashes and creates opportunities for indirect escalation and attacks on allied and commercial targets far from Iran’s borders.
A potential flashpoint in the event of a conflict is the Strait of Hormuz which is a strategic chokepoint through which approximately 20 percent of global crude oil exports pass. Events involving Iranian vessels and threats to commercial shipping underscore how easily economic activity in the region can become a flashpoint.
The perception of heightened risk around the Strait of Hormuz alone has driven oil prices higher, as markets price in the possible outcome of supply disruption and increased freight costs.
As oil benchmarks climb, energy markets and investors are watching closely, the concern will not only be just direct conflict, but of the wider ripple effects through global supply chains.
In addition, the implications for business and travel are immediate and tangible. Commercial shipping companies that heavily depend on transit routes such as the Arabian Sea face elevated risk of harassment or interdiction especially from threat actors such as the Houthi’s in Yemen who have pledged support to Iran in the event of U.S. attack. Potential encounters elevate insurance premiums, rerouting costs, and crew safety concerns. Furthermore, business travel to the region, from the Gulf to the Eastern Mediterranean, should consider enhanced risk assessments and contingency planning.
Outlook
SPS assesses tensions between the United States and Iran are likely to remain elevated in the near to medium term, with limited prospects for rapid-descalation. Although diplomatic contacts and indirect negotiations have occurred, these efforts remain fragile and overshadowed by the military buildup in the region. This expanded military presence by the U.S., combined with Iran’s public signalling of heightened military readiness and deterrence capabilities, suggests both are preparing for the possibility of confrontation if political engagement breaks down. In this environment, even minor incidents, such as proxy attacks, maritime confrontations, or airspace violations, carry the potential to escalate rapidly.
We advise foreign travelers, NGO’s, and multinational enterprises with exposure in the Middle East to consider the following risk-mitigation measures:
Strengthen contingency and planning: Develop scenario-based business continuity plans that account for sudden escalation, including military action.
Enhance supply-chain resilience: Take into account alternative routes and prepare for logistics arrangements to reduce vulnerability to port closures, airspace restrictions, or shipping disruptions.
Limit exposure to high-risk environments: Avoid travel that is not necessary, protest sites, or strategic infrastructure where spillover violence could occur.
Maintain evacuation and relocation capabilities: Make sure staff have access to clear evacuation procedures, emergency travel options, and secure communication channels with your respective embassies.
Coordinate closely with local partners and security providers: Maintain regular contact with trusted local counterparts, legal advisors, and security consultants to obtain timely situational updates and guidance during periods of elevated tension.
