Iran's Retaliation Shakes Gulf Energy Hub; Oil Markets Brace for Volatility

Iran’s missile and drone barrage struck the United Arab Emirates, Qatar, Kuwait, Oman and Bahrain overnight Sunday, targeting Gulf Cooperation Council states whose waters and ports sit at the heart of global energy trade. The attacks came hours after the United States Central Command struck approximately 140 military targets across Iranian territory, hitting missile and drone launch sites, naval assets and ammunition storage facilities. The economic stakes could hardly be higher: the Strait of Hormuz, the narrow chokepoint through which roughly one-fifth of global energy exports historically flowed, remains effectively closed.

The IRGC declared the strait “closed until further notice” on Saturday, hours before the overnight barrage, stating that no vessels would be allowed to transit. That announcement, combined with an Iranian attack on a Cyprus-flagged container ship in the same waters, sent a clear signal to energy markets already absorbing multiyear price highs. Control of that bottleneck has become the central economic and strategic prize of a conflict that began on February 28 with US-Israeli strikes that killed Iran’s supreme leader, Ayatollah Ali Khamenei.

Additional reference context is available at https://www.aljazeera.com/news/2026/7/12/missiles-and-drones-fired-at-gulf-states-after-night-of-us-strikes-on-iran.

The breadth of Sunday’s Iranian operation was striking. All Gulf Cooperation Council states except Saudi Arabia reported intercepting missiles or drones. Qatar’s Ministry of Interior confirmed three people were injured by falling shrapnel, including one child. Bahrain, which hosts the US Navy’s 5th Fleet, experienced missile alerts for the third time on Sunday. Kuwait’s military confirmed it was intercepting incoming fire. In the UAE, air defence systems engaged with incoming projectiles, though authorities later noted the “missile threats” had fallen outside its borders. Oman’s state news agency reported drones targeting several sites in the Musandam governorate, an exclave that extends directly into the strait. The IRGC claimed it had destroyed a US radar installation in Kuwait and hit a command-and-control centre and drone hangars at a US military base in Jordan. Jordanian authorities confirmed three Iranian missiles landed within the country but caused no casualties. Iranian state media reported one army officer killed in the CENTCOM strikes.

Meanwhile, a June memorandum of understanding between Washington and Tehran, designed to restore maritime traffic through the strait, appears to be unravelling under the weight of the violence. Under that agreement, Tehran had consented to allow resumed passage but insisted vessels use an Iran-approved route, preserving a degree of operational control. Ships attempting to use an alternative lane closer to the Omani coast have been attacked. US President Donald Trump, facing pressure to reduce energy prices ahead of November’s midterm elections, said last week he believed the deal was “over,” though he later indicated he had agreed to Tehran’s request to continue negotiations.

Qatar’s Ministry of Interior condemned the overnight attacks as a “dangerous escalation” that would undermine diplomatic progress. Despite the violence, Omani and Iranian officials said Sunday they would continue technical and political talks on navigation through the strait. The Iranian and Omani foreign ministers had met on Saturday specifically to discuss maritime traffic in the waterway, which sits in the territorial waters of both nations but has long functioned as an international shipping corridor. Tehran, however, stopped short of committing to unrestricted passage.

The financial exposure across the region is considerable. Gulf states whose sovereign wealth, port revenues and hydrocarbon export earnings depend on open sea lanes face mounting uncertainty as the conflict grinds on. Before the war began in late February, nearly a fifth of the world’s oil passed through the strait. Whether the Omani-Iranian diplomatic channel can survive another night like Sunday’s is the question energy traders and regional operators are now pricing.