Over the past two years, Iran has suffered the most significant blows to its deterrence capacity since the founding of the Islamic Republic, losing much of the regional influence it once wielded through loyal proxies in Iraq, Syria, Lebanon, and even Yemen. Once able to mobilize allied forces across the Middle East in pursuit of shared interests against Israel, Tehran now faces a drastically diminished strategic position. Following Hamas’s October 2023 attacks, Israel systematically targeted Iranian proxies—crippling Hamas in Gaza, weakening Hezbollah in Lebanon, and, with the collapse of Bashar Al-Assad’s regime in December 2024, depriving Iran of its crucial Syrian ally. Subsequent Israeli strikes deep into Iranian territory further exposed Tehran’s intelligence failures, limited military reach, and diplomatic isolation. Yet the current retrenchment of Iran and its allies does not signify collapse; rather, it represents a phase of strategic recalibration within an evolving regional order characterized by multi-alignment and shifting power centers.
Erosion of the Axis of Resistance
The June 2025 Israeli strikes on Iranian territory marked a watershed moment. For the first time, Israel directly targeted Iran’s nuclear and military infrastructure, exposing glaring weaknesses in Tehran’s defenses and intelligence apparatus. The 12-day confrontation—following years of shadow warfare between the two rivals—dispelled the illusion that Iran could indefinitely rely on ambiguity and proxy deterrence, while underscoring its growing diplomatic isolation. Adding to the blow, Israel’s campaign of targeted assassinations decapitated crucial nodes in Iran’s regional network. The killings of Hamas political leader Ismail Haniyeh in Tehran and Hezbollah’s longtime chief Hassan Nasrallah in Beirut were both symbolic and strategic. These figures embodied Iran’s ideological and operational reach across the region, and their deaths—and the muted Iranian response that followed—reflected how deeply Tehran’s deterrence capacity had eroded.
In Lebanon, Hezbollah has been forced into an unprecedented defensive posture, its finances strained, and its political influence challenged by an emboldened government and a weary population. In Gaza, Hamas’s infrastructure lies in ruins, and Iran’s ability to materially support the group has been sharply curtailed by sanctions and logistical constraints. In Iraq, pro-Iranian militias still exist but with diminished freedom of action. Baghdad’s growing coordination with the United States, alongside domestic political pressure, has curtailed their operations. Meanwhile, in Yemen, the Houthis continue to launch attacks in the Red Sea but have been weakened by Israeli and U.S. strikes and remain geographically too distant to influence the “Palestinian front” in any decisive way. Syria—once the vital conduit linking Iran to Lebanon and the Palestinian territories—has effectively slipped from Tehran’s grasp following the fall of the Assad regime in late 2024, depriving Iran of a cornerstone of its regional architecture. Taken together, these developments represent a historic weakening of the Axis of Resistance.
Iran’s Deepening Diplomatic Isolation
As Iran’s network of proxy allies has weakened, Tehran has found itself increasingly isolated. Despite years of cooperation during the Syrian civil war, Russia offered only rhetorical backing to Tehran during the June 2025 Israeli attacks, deepening mistrust within Iran’s leadership. Reports that Moscow withheld intelligence—and may even have shared information with Israel—highlighted the asymmetry of their partnership. Russia treats Iran as a junior, expendable ally—valuable for leverage against the West but unreliable in crisis. Tehran’s support for Moscow over Ukraine has further strained its already limited ties with Europe.
China’s engagement with Iran displays a similar imbalance: while Beijing remains Tehran’s primary oil buyer—accounting for nearly 90 percent of exports—it avoids military entanglement and prioritizes regional stability over alignment with Iran. Its continued arms sales to U.S.-aligned Gulf states such as Saudi Arabia and the UAE underline this pragmatic stance. For Tehran, dependence on China provides economic relief but little strategic security.
Regionally, Arab states once open to détente with Iran—such as Saudi Arabia, the UAE, Bahrain, and Egypt—now emphasize stability and economic modernization, deepening security coordination with Israel under U.S. sponsorship. Leaked documents confirming regular Israeli-Arab military consultations, alongside Iran’s exclusion from recent Gaza ceasefire negotiations, illustrate Tehran’s growing marginalization and the erosion of its regional influence.
The Return of Sanctions and Tehran’s New Strategy
If Iran’s geopolitical and military position appears precarious, its economic outlook is even bleaker. The reactivation of UN sanctions by Britain, France, and Germany in August 2025 has closed the door on any remaining hope of relief. This comes on top of Washington’s “maximum pressure” campaign, which had already crippled Iran’s access to global banking and foreign investment. The country’s currency continues to fall, inflation remains rampant, and years of drought and mismanagement have produced chronic electricity blackouts and water shortages. Domestically, the Islamic Republic faces growing fatigue. After years of economic hardship, protests, and political repression, many Iranians are weary of their government’s costly regional ventures. Public patience is wearing thin with leaders who prioritize “resistance” over basic livelihoods. Yet despite widespread disillusionment, the absence of a coherent opposition movement or charismatic leadership has left the Islamic Republic as the only viable political structure—battered but still standing.
Masoud Pezeshkian’s government and Foreign Minister Abbas Araqchi are now under criticism from both reformist and conservative circles in Iran. Hardliners accuse them of passivity toward the West, while reformists fault the administration for conservatism and inaction, including the decision to decline participation in the 2025 Gaza Peace Summit in Sharm el-Sheikh.
In this context, Tehran’s adoption of a more cautious, defensive posture aimed at avoiding direct escalation with Israel appears less a strategic choice than a necessity imposed by circumstance. The Islamic Republic’s military deterrence has been shaken, its economic foundations undermined, and its ideological appeal diminished. Iran has intensified outreach to countries outside the Western bloc, seeking to consolidate ties with Russia, China, and members of the Global South. This strategy reflects the “Look East” doctrine advanced by Supreme Leader Ayatollah Ali Khamenei, which aims to counter Western pressure by anchoring Iran within alternative economic and geopolitical networks. In July, Foreign Minister Abbas Araqchi attended the BRICS Summit in Rio de Janeiro, while in early September, President Masoud Pezeshkian participated in the Shanghai Cooperation Organization Summit in Tianjin, China. Tehran views these engagements—along with participation in the Non-Aligned Movement (NAM) meeting in Kampala, the world’s largest grouping outside the UN system—as key platforms for reinforcing its position amid sanctions and isolation.
Within these alliances, Iran seeks both diplomatic legitimacy in an emerging multipolar order and economic relief as a means to bypass sanctions and diversify markets. Beyond China—its largest trading partner, accounting for roughly 30 percent of Iran’s total trade—Tehran has sought closer economic cooperation with other NAM countries. In 2023, Iranian exports reached $2.18 billion to Turkey, $1 billion to India, $943 million to Pakistan (with a new agreement to expand trade from $3 billion to $10 billion), and $453 million to the UAE (Source: Observatory of Economic Complexity). These new partnerships, however, while politically useful, are economically limited and, in the case of China and Russia, strategically unequal in the short term.
Strategic Adaptation and Stability Challenges in the Middle East
Iran’s recent setbacks in the Middle East have compelled a strategic recalibration, as the Islamic Republic navigates diminished regional influence, heightened isolation, domestic tensions, and constrained economic and military capacities. Yet the fragility of the current regional order, as well as Iran’s resilience, should not be underestimated. Analyses of Iran’s regional posture have often focused narrowly on its military alliances and proxy networks, overlooking the economic and financial dimensions that underpin its influence. As a recent Chatham House report highlighted, Iran and the Axis of Resistance have used complex financial and energy trade systems to bypass sanctions and external constraints. In a changing global order, Tehran has adapted by forming pragmatic ties with both sympathetic and Western-aligned states. Its strategy now relies less on ideological resistance and more on economic interdependence and flexible regional engagement.
Furthermore, the Axis members have historically leveraged governance vacuums to convert crises into opportunities for social and political influence. Though now a fragmented network rather than a unified geopolitical project, this capacity to fill governance gaps in fragile states such as today’s Lebanon, Syria, Iraq, and Palestine—providing services, employment, and welfare where governments falter—contribute to reinforce their legitimacy. Lebanon illustrates this dynamic: the new government inherited a weak state and lacks the means to challenge Hezbollah without external support, yet U.S. and other international assistance has been largely limited to humanitarian aid. Following Aoun’s inauguration, Washington even froze security funding for Lebanon’s armed forces, while Hezbollah maintains a strong community foothold.
Finally, Israel’s aggressive regional policies—in Gaza, as well as its strikes on Iran, Lebanon, Syria, Qatar, and Yemen—have left deep scars across the Middle Eastern public. A poll by the Arab Center for Research and Policy Studies found that 77 percent of respondents view the United States and Israel as the main threats to regional stability, compared with only 7 percent who saw Iran as the primary threat. This suggests that, despite Arab governments’ pragmatic rapprochement with Israel, public resentment remains strong and is growing. In Saudi Arabia, for instance, opposition to recognizing Israel rose from 38 percent in 2022 to 68 percent in January 2024 (ACRPS). Public opinion must therefore be factored into any long-term assessment of the region.
In conclusion, Iran appears to be shifting from a posture of regional expansion to one of strategic containment, emphasizing pragmatic endurance over ideological leadership. Its future influence will increasingly hinge rather than on military posturing, on its capacity to leverage diplomacy, economic engagement, and domestic consolidation. Equally critical will be the role of regional and global actors in fostering durable stability through inclusive development and sustained diplomatic initiatives. Without careful management, unresolved grievances and marginalized populations risk creating fertile conditions for renewed instability and the rise of disruptive forces.
Cover photo: Mourners hold Iranian flags gathering at Tehran’s Azadi (Freedom) Square on June 28, 2025, for the state funeral procession of Iranian military commanders and scientists killed in Israeli strikes. The ceremony honored approximately 60 casualties from the Iran-Israel conflict. (Photo by Nikan / Middle East Images via AFP)
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