The Gaza war is escalating. How bad will the Middle East crisis get?

On October 7, Hamas fighters launched a bloody attack against Israel, using paragliders, speedboats and underground tunnels to carry out an offensive that killed almost 1,200 people and saw hundreds more taken back to the Gaza Strip as prisoners.

Almost three months on, Israel’s massive military retaliation is reverberating around the region, with explosions in Lebanon and rebels from Yemen attacking shipping in the Red Sea. Meanwhile, Western countries are pumping military aid into Israel while deploying fleets to protect commercial shipping — risking confrontation with the Iranian navy.

That’s in line with a grim prediction made last year by Iranian Foreign Minister Hossein Amirabdollahian, who said that Israel’s counteroffensive in Gaza meant an “expansion of the scope of the war has become inevitable,” and that further escalation across the Middle East should be expected.

What’s happening?

The Israel Defense Forces are still fighting fierce battles for control of the Gaza Strip in what officials say is a mission to destroy Hamas. Troops have already occupied much of the north of the 365-square-kilometer territory, home to around 2.3 million Palestinians, and are now stepping up their assault in the south.

Entire neighborhoods of densely-populated Gaza City have been levelled by intense Israeli shelling, rocket attacks and air strikes, rendering them uninhabitable. Although independent observers have been largely shut out, the Hamas-controlled Health Ministry claims more than 22,300 people have been killed, while the U.N. says 1.9 million people have been displaced.

On a visit to the front lines, Israeli Defense Minister Yoav Gallant warned that his country is in the fight for the long haul. “The feeling that we will stop soon is incorrect. Without a clear victory, we will not be able to live in the Middle East,” he said.

As the Gaza ground war intensifies, Hamas and its allies are increasingly looking to take the conflict to a far broader arena in order to put pressure on Israel.

According to Seth Frantzman, a regional analyst with the Jerusalem Post and adjunct fellow at the Foundation for Defense of Democracies, “Iran is certainly making a play here in terms of trying to isolate Israel [and] the U.S. and weaken U.S. influence, also showing that Israel doesn’t have the deterrence capabilities that it may have had in the past or at least thought it had.”

Northern front

On Tuesday a blast ripped through an office in Dahieh, a southern suburb of the Lebanese capital, Beirut — 130 kilometers from the border with Israel. Hamas confirmed that one of its most senior leaders, Saleh al-Arouri, was killed in the strike.

Government officials in Jerusalem have refused to confirm Israeli forces were behind the killing, while simultaneously presenting it as a “surgical strike against the Hamas leadership” and insisting it was not an attack against Lebanon itself, despite a warning from Lebanese caretaker Prime Minister Najib Mikati that the incident risked dragging his country into a wider regional war.

Tensions between Israel and Lebanon have spiked in recent weeks, with fighters loyal to Hezbollah, the Shia Islamist militant group that controls the south of the country, firing hundreds of rockets across the frontier. Along with Hamas, Hezbollah is part of the Iranian-led "Axis of Resistance" that aims to destroy the state of Israel.

In a statement released on Tuesday, Iran’s foreign ministry said the death of al-Arouri, the most senior Hamas official confirmed to have died since October 7, will only embolden resistance against Israel, not only in the Palestinian territories but also in the wider Middle East.

"We’re talking about the death of a senior Hamas leader, not from Hezbollah or the [Iranian] Revolutionary Guards. Is it Iran who’s going to respond? Hezbollah? Hamas with rockets? Or will there be no response, with the various players waiting for the next assassination?" asked Héloïse Fayet, a researcher at the French Institute for International Relations.

In a much-anticipated speech on Wednesday evening, Hezbollah leader Hassan Nasrallah condemned the killing but did not announce a military response.

Red Sea boils over

For months now, sailors navigating the narrow Bab-el-Mandeb Strait that links Europe to Asia have faced a growing threat of drone strikes, missile attacks and even hijackings by Iran-backed Houthi militants operating off the coast of Yemen.

The Houthi movement, a Shia militant group supported by Iran in the Yemeni civil war against Saudi Arabia and its local allies, insists it is only targeting shipping with links to Israel in a bid to pressure it to end the war in Gaza. However, the busy trade route from the Suez Canal through the Red Sea has seen dozens of commercial vessels targeted or delayed, forcing Western nations to intervene.

Over the weekend, the U.S. Navy said it had intercepted two anti-ship missiles and sunk three boats carrying Houthi fighters in what it said was a hijacking attempt against the Maersk Hangzhou, a container ship. Danish shipping giant Maersk said Tuesday that it would "pause all transits through the Red Sea until further notice," following a number of other cargo liners; energy giant BP is also suspending travel through the region.

On Wednesday the Houthis targeted a CMA CGM Tage container ship bound for Israel, according to the group’s military spokesperson Yahya Sarea. “Any U.S. attack will not pass without a response or punishment,” he added.

“The sensible decision is one that the vast majority of shippers I think are now coming to, [which] is to transit through round the Cape of Good Hope,” said Marco Forgione, director general at the Institute of Export & International Trade. “But that in itself is not without heavy impact, it’s up to two weeks additional sailing time, adds over £1 million to the journey, and there are risks, particularly in West Africa, of piracy as well.”

However, John Stawpert, a senior manager at the International Chamber of Shipping, noted that while “there has been disruption” and an “understandable nervousness about transiting these routes … trade is continuing to flow."

“A major contributory factor to that has been the presence of military assets committed to defending shipping from these attacks,” he said.

The impacts of the disruption, especially price hikes hitting consumers, will be seen “in the next couple of weeks,” according to Forgione. Oil and gas markets also risk taking a hit — the price of benchmark Brent crude rose by 3 percent to $78.22 a barrel on Wednesday. Almost 10 percent of the world’s oil and 7 percent of its gas flows through the Red Sea.

Western response

On Wednesday evening, the U.S., Australia, Bahrain, Belgium, Canada, Denmark, Germany, Italy, Japan, the Netherlands, New Zealand, and the United Kingdom issued an ultimatum calling the Houthi attacks "illegal, unacceptable, and profoundly destabilizing," but with only vague threats of action.

"We call for the immediate end of these illegal attacks and release of unlawfully detained vessels and crews. The Houthis will bear the responsibility of the consequences should they continue to threaten lives, the global economy, and free flow of commerce in the region’s critical waterways," the statement said.

Despite the tepid language, the U.S. has already struck back at militants from Iranian-backed groups such as Kataeb Hezbollah in Iraq and Syria after they carried out drone attacks that injured U.S. personnel.

The assumption in London is that airstrikes against the Houthis — if it came to that — would be U.S.-led with the U.K. as a partner. Other nations might also chip in.

Two French officials said Paris is not considering air strikes. The country’s position is to stick to self-defense, and that hasn’t changed, one of them said. French Armed Forces Minister Sébastien Lecornu confirmed that assessment, saying on Tuesday that “we’re continuing to act in self-defense.”

"Would France, which is so proud of its third way and its position as a balancing power, be prepared to join an American-British coalition?" asked Fayet, the think tank researcher.

Iran looms large

Iran’s efforts to leverage its proxies in a below-the-radar battle against both Israel and the West appear to be well underway, and the conflict has already scuppered a long-awaited security deal between Israel and Saudi Arabia.

“Since 1979, Iran has been conducting asymmetrical proxy terrorism where they try to advance their foreign policy objectives while displacing the consequences, the counterpunches, onto someone else — usually Arabs,” said Bradley Bowman, senior director of Washington’s Center on Military and Political Power. “An increasingly effective regional security architecture, of the kind the U.S. and Saudi Arabia are trying to build, is a nightmare for Iran which, like a bully on the playground, wants to keep all the other kids divided and distracted.”

Despite Iran’s fiery rhetoric, it has stopped short of declaring all-out war on its enemies or inflicting massive casualties on Western forces in the region — which experts say reflects the fact it would be outgunned in a conventional conflict.

“Neither Iran nor the U.S. nor Israel is ready for that big war,” said Alex Vatanka, director of the Middle East Institute’s Iran program. “Israel is a nuclear state, Iran is a nuclear threshold state — and the U.S. speaks for itself on this front.”

Israel might be betting on a long fight in Gaza, but Iran is trying to make the conflict a global one, he added. “Nobody wants a war, so both sides have been gambling on the long term, hoping to kill the other guy through a thousand cuts.”

Emilio Casalicchio contributed reporting.