New escalation in regional conflict

The killing of three American soldiers in Jordan by pro-Iran militias via UAV strikes initiated a new escalation in the escalating regional conflict. Since October 7th, concerns about regional warfare seemed obsolete. We previously noted Israeli Prime Minister Netanyahu's attempt to expand the Gaza conflict regionally and entangle the US in conflict with Iran. The Jordan attack partially succeeded in these efforts. Over the past week, the US conducted military operations in the region, signaling a response.

Following the Jordan attack, Republican politicians called for a "strong response," pressuring Biden to directly target Iran. Senate Minority Leader Mitch McConnell emphasized the need to impose heavy costs on Iranian sponsors, while Senator Lindsey Graham called for targeted strikes within Iran. Senator Tom Cotton urged attacks in the Middle East and Iran, suggesting Biden would be deemed a coward if he didn't act. Senator John Cornyn advocated targeting Iran's Revolutionary Guards and Quds Force in Tehran.

Despite Biden's assurance of responding to selected targets at a chosen time, political and public pressure led to strikes on 85 different targets in Iraq and Syria last week. The White House stated their response wouldn't be limited to these attacks and could span weeks or even months. While the administration claims not to target Iran, it seeks to alleviate criticisms of failing to provide a deterrent response. Despite its reluctance for war, the administration acknowledges engagement in a long-term regional conflict.

The reaction from the Iraqi government underscores the nation's discomfort with being caught between Washington and Tehran's regional conflict. Kataib Hezbollah's sudden cessation of operations in Iraq could be seen as Iran's attempt to regain Iraqi support amidst American attacks. Similar to the US, Iran signals reluctance for war but vows to retaliate if attacked, indicating a mutual desire for controlled escalation. The administration's focus on reducing Iranian proxy military capacities and avoiding targeting top Iranian commanders suggests a desire to maintain control over escalation.

The response to the Jordan attack extended beyond Iraq and Syria, with strikes on Houthi targets in Yemen, likely aimed at preventing their missile attacks in the Red Sea. The recent decline in Suez Canal transit revenues amplifies the focus on these operations. However, the Biden administration's efforts to display strength against Iranian proxies must also be considered. As long as the regional proxy war persists, tension in the Red Sea won't dissipate, increasing international trade costs and inflation in commodity prices. While Biden aims to mitigate inflation, managing the economic costs of the controlled regional conflict with Iran poses a challenge.

The US response to the Jordan attacks heralds a new escalation in the regional conflict between the US and Iran, yet both actors appear to seek controlled escalation. Although Netanyahu may prefer an expanded conflict involving Hezbollah, such a scenario risks spiraling out of control. Hezbollah's involvement in a war with Israel would prompt Iran's intervention to protect its Lebanese proxy, plunging Lebanon into chaos and derailing the "controlled regional conflict" between the US and Iran. Despite Biden's desire to avoid this scenario, how long he can withstand public pressure for a stronger response to Iran remains uncertain.

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