Why the U.S. Bombed Iran: Causes, Progression, and Economic Fallout of the Middle East War

On February 28, 2026, the United States and Israel launched massive airstrikes across Iran. Iranian Supreme Leader Ali Khamenei was killed, and Iran retaliated by blockading the Strait of Hormuz. Brent crude spiked to $82 per barrel intraday, and the Korean won fell to 1,456 per dollar. This article examines why the war happened, how far it has progressed, and what economic shockwaves it is sending through the global economy.

Why the War Happened: Iran’s Nuclear Program and U.S. Foreign Policy

From JCPOA Collapse to Enriched Uranium Stockpiling

The story begins with the 2015 JCPOA (Joint Comprehensive Plan of Action), commonly known as the Iran nuclear deal. Iran agreed to limit uranium enrichment in exchange for the lifting of economic sanctions by the P5+1 nations including the U.S. In May 2018, however, President Trump (first term) unilaterally withdrew from the agreement, reimposing sanctions on Iran under the banner of a “Maximum Pressure” strategy.¹

The problem was that after the deal collapsed, Iran accelerated its uranium enrichment. According to the IAEA, by June 2025 Iran possessed approximately 441 kg (972 pounds) of uranium enriched to 60% purity — a 3.6× increase from 122 kg in February 2024 in just one year.² Uranium enriched above 90% is weapons-grade material, and 60%-enriched uranium can technically be converted to weapons-grade in a matter of weeks.

In June 2025, the U.S. struck three Iranian nuclear facilities with bunker-buster bombs. Iran responded by halting cooperation with the IAEA, and in August, France, Germany, and the UK (E3) triggered the UN Security Council’s snapback mechanism, restoring sanctions against Iran in September.³

The Collapse of 2025–2026 U.S.-Iran Negotiations

President Trump (second term) employed negotiations and military threats simultaneously. On April 12, 2025, U.S. envoy Steve Witkoff and Iranian Foreign Minister Abbas Araghchi began indirect nuclear talks in Muscat, Oman. Trump set a 60-day deadline.⁴ The core agenda items were:

1. Permanent halt to uranium enrichment
2. Constraints on the ballistic missile program
3. Cessation of support for regional proxies including Hamas, Hezbollah, and the Houthis

When the deadline passed without agreement, Israel launched a preemptive strike on Iran in June 2025, triggering the Twelve-Day War. Even after that war ended, the fundamental conflict remained unresolved.

On February 6, 2026, a second round of negotiations reopened in Oman. Just 22 days later, on February 28, diplomacy gave way to military action.

Internal Crisis in Iran: Protest Massacre and Regime Change Talk

Starting in late December 2025, massive anti-government protests erupted across Iran. A plunging rial, surging prices, and economic crisis were the immediate causes. Protests spread to over 100 cities, marking the largest since the 1979 revolution.⁵

The Iranian regime deployed the IRGC and Basij militia to violently suppress the protests, using live ammunition, shotguns, machine guns, and drones. The U.S.-based Human Rights Activists News Agency (HRANA) estimated approximately 7,000 dead, while President Trump cited “at least 32,000 killed.” Two Iranian health ministry officials reportedly provided a similar figure of approximately 30,000.⁶

On January 13, Trump told the Iranian people: “Keep protesting, help is on the way.” On February 13, he publicly stated that “regime change in Iran could be the best thing that could happen.” In his February 24 State of the Union address, he called Iran “the world’s number one state sponsor of terrorism” and warned of its “sinister” nuclear weapons and missile ambitions.⁷

February 28: Airstrikes Begin and Khamenei Killed

U.S.-Israeli Joint Operation

At approximately 9:40 AM local time on February 28, 2026, violent explosions were heard across multiple Iranian cities. The U.S. and Israel simultaneously struck Iran’s military facilities, missile bases, and IRGC installations. The U.S. military deployed B-2 stealth bombers armed with 2,000-pound bombs against Iran’s ballistic missile facilities.⁸

President Trump repeatedly claimed Iran’s nuclear program had been “obliterated,” though subsequent analysis suggested Iran’s nuclear capabilities were “weakened” rather than “destroyed.” The IAEA stated on March 2 that it had found “no indication that Iranian nuclear facilities were hit,” while Iran claimed one nuclear facility had been struck — accounts that contradicted each other.⁹

Khamenei’s Death and Iran’s Retaliation

On March 1, Iranian state media confirmed that Supreme Leader Ali Khamenei had been killed in the airstrikes, declaring a 40-day mourning period and 7-day national holiday. IRGC Commander-in-Chief Abdolrahim Mousavi and former president Mahmoud Ahmadinejad were also confirmed killed. CBS News, citing intelligence sources, reported that 40 senior Iranian officials died in the strikes.¹⁰

Iran retaliated immediately. The IRGC launched what it described as its “largest-ever” missile attack, simultaneously striking U.S. military bases across the Middle East. Dubai’s airport and the iconic Burj Al Arab were also hit by Iranian missiles. Three U.S. military personnel were killed, and President Trump acknowledged “there are likely additional casualties.”¹¹

Strait of Hormuz Blockade

Iran’s most powerful economic retaliation card was the blockade of the Strait of Hormuz. This narrow waterway between Oman and Iran, approximately 54 km wide, carries about one-quarter of all seaborne oil transport worldwide. According to the U.S. Energy Information Administration (EIA), an average of approximately 20 million barrels of oil per day passed through the strait in 2024 — roughly 20% of global oil consumption.¹²

When Iran declared the strait blockaded, shipping insurance premiums skyrocketed and major carriers began avoiding Persian Gulf routes. CNBC reported that the “de facto closure of the Strait of Hormuz” was maximizing crude supply concerns.¹³

Global Economic Shockwaves

Oil Prices: Brent at $82, the Largest Single-Day Surge in 4 Years

Oil prices surged immediately after the airstrikes. Brent crude, trading around $72 per barrel on February 27, spiked to $82 intraday on March 1 — its highest level in 14 months. The roughly 13% rise from February 27 was the largest single-day increase in four years.¹⁴ It subsequently closed near $80. WTI also surged 8.4% to close at $72.74 per barrel, then climbed further in after-hours trading on the Hormuz blockade news.¹⁵

On Monday, March 2, as Asian markets opened, Brent jumped another 7.6% to $78.41, touching $82 again intraday. The Economist called this “potentially the biggest oil shock in years.”¹⁶

Compared to past Middle Eastern wars: during the 1990 Gulf War, Iraq’s invasion of Kuwait sent oil prices surging roughly 120% from about $21 to $46 per barrel. However, that price shock subsided within nine months and was shorter and less extreme than the 1973–74 oil crisis or the 1979–80 Iranian Revolution.¹⁷ Whether this crisis would escalate to Gulf War levels or end as a short-term correction was the market’s key concern.

Exchange Rates: Won at 1,456 per Dollar, 1,500 Breach Feared

Safe-haven demand strengthened the dollar as war news broke. On March 2, the won-dollar exchange rate surged to 1,456 won intraday on the Seoul foreign exchange market.¹⁸ Given that the February average was 1,448.4 won, this represented a significant additional jump in a single day.

According to Chosun Ilbo reporting, analysts projected a range of 1,430–1,470 won if the conflict resolved quickly, but raised the possibility of breaching 1,500 won if it became protracted.¹⁹ Newsis reported that “the exchange rate, which had seemed stable in the low 1,400s recently, has started shaking again.”

A rising exchange rate directly pushes up import prices. Since South Korea depends heavily on the Middle East for oil imports, simultaneous increases in oil prices and the exchange rate create a double hit on energy import costs. This immediately translates into consumer price increases — inflation pressure. With the Bank of Korea holding rates steady for six consecutive meetings, this variable makes the timing of rate cuts even more uncertain.

Stock Markets: Global Sell-Off, KOSPI Volatility Rises

Global stock markets fell as Asian trading opened on Monday, March 2. S&P 500 futures opened down 1.22%, and Japan’s Nikkei 225 reversed into decline for the first time in five sessions. Fortune described it as “a broad global sell-off triggered by the U.S.-Iran-Israel clash.”²⁰

South Korea’s KOSPI had broken through the 6,300 level on February 26, just before the strikes, hitting an all-time high. Analysts said “short-term correction is inevitable” while noting that “fundamentals are solid” given upwardly revised corporate earnings forecasts.²¹ However, concerns dominated that rapid foreign capital outflows could amplify volatility.

Interestingly, stock markets have historically shown a consistent pattern during Middle Eastern wars. In the 1990 Gulf War, 2003 Iraq War, 2006 Israel-Hezbollah War, and 2019 Aramco drone attack, markets followed a pattern of initial sharp decline followed by recovery within one to two months.²² Ed Yardeni of Yardeni Research stated it “wouldn’t be surprising if Monday morning’s S&P 500 selloff reverses into a rally on expectations of post-war oil price declines.”

ISM Prices Paid at 70.5: Inflation Warning

Coincidentally, the U.S. ISM Manufacturing Prices Paid Index, released virtually simultaneously with the war’s outbreak, shocked markets. The February reading came in at 70.5, far exceeding expectations of 59.5 — an 11.5-point surge from the prior month’s 59.0.²³

The ISM Prices Paid Index reflects how manufacturers experience changes in input costs for raw materials and labor. Above 50 indicates rising costs; below 50 indicates falling costs. A reading of 70.5 signaled rapidly rising input costs, while the supplier deliveries index also rose to 55.1, indicating slowing deliveries. Reuters summarized: “Delivery times lengthened while input costs surged.”

Inflation reignition signals were already appearing before the Iran war. If surging oil prices pile on top, the Fed’s rate-cut path could be fundamentally disrupted. Bloomberg reported that “the Iran war has shrunk rate-cut expectations, hitting bonds.”²⁴

Comparison with Past Wars: Gulf War, Iraq War, and 2026

Markets have followed similar stages whenever war breaks out in the Middle East. Stage 1: fear-driven oil price surge and stock decline. Stage 2: stabilization as the actual extent of supply disruption becomes clear. Stage 3: if the war ends quickly, oil prices often revert to pre-war levels.

What makes the 2026 U.S.-Iran war critically different from past cases is that the Strait of Hormuz was actually blockaded. In previous crises, a Hormuz blockade remained a “threat.” This time, Iran followed through. Even a few days of closure for a strait handling 20 million barrels per day would throw global oil markets into severe supply shortage. This is the biggest difference from past wars and the reason markets are treating this crisis more seriously.

Impact on the South Korean Economy: The Triple Squeeze of Oil, Exchange Rates, and Interest Rates

South Korea is a country with high oil import dependency. Rising oil prices → rising import prices → rising consumer prices: this is the classic inflation transmission pathway. When the won-dollar exchange rate also rises, even more won is needed to buy the same amount of oil.

In this situation, the Bank of Korea’s options narrow. It wants to cut rates to counter economic slowdown, but if inflation rears its head again, rate cuts become premature. There’s a saying about approaching complex problems with simple principles, but the Bank of Korea currently faces a dilemma of having to solve two incompatible challenges simultaneously: “rising oil prices vs. economic stimulus.”

The impact on households is also direct. Fuel and heating costs rise, and imported food and manufactured goods follow. As discussed in behavioral economics research on spending behavior, consumers respond to rising prices by cutting spending — which in turn leads to further contraction of domestic demand. This is why concerns about stagflation — the worst-case scenario of rising prices combined with economic recession — are growing.

What Comes Next: Three Scenarios

Scenario 1: Quick Resolution — The war ends within days and the Strait of Hormuz blockade lifts within 3–4 days. Oil prices likely return to the $70 range, the exchange rate stabilizes in the 1,430–1,470 won range, and stock markets bounce back quickly.

Scenario 2: Weeks of Combat — The U.S. takes 2–4 weeks to systematically dismantle Iran’s military capabilities. The Hormuz blockade remains partially in effect and oil stays in the $80–90 range. If inflation expectations become entrenched, rate cuts by both the Fed and the Bank of Korea become impossible at least through the first half of the year.

Scenario 3: Escalation — Iran’s regional proxies (Hezbollah, Houthis, Iraqi militias) enter full-scale combat, and large-scale missile attacks hit Israeli homeland. Oil could breach $100, and the probability of a global recession rises sharply. With reports of Hezbollah attacks on Israel already emerging on March 2, this scenario cannot be entirely ruled out.

Summary

The 2026 U.S.-Iran war didn’t happen overnight. The 2018 JCPOA withdrawal, Iran’s accelerated uranium enrichment, the 2025 Israel-Iran Twelve-Day War, internal protests and massacre, and collapsed nuclear negotiations — all of these accumulated to this point. The economic fallout is being transmitted worldwide through the bottleneck of the Strait of Hormuz.

Brent at $82, the won at 1,456 per dollar, ISM Prices Paid at 70.5 — these three numbers tell the temperature of the global economy right now. Whether the war ends in days, takes weeks, or spreads across the entire Middle East will fundamentally reshape the economic landscape of 2026.