The next target for the United States and Israel: Iran's economy

These two longtime allies—the U.S. and Israel—are continuing to intensify their attacks on Iran’s infrastructure and are planning strikes on its energy facilities.

A video posted on social media on Saturday shows, according to reports, thick plumes of smoke rising above a factory in Iran’s Mahshahr petrochemical zone after an Israeli airstrike.

TEL AVIV—The United States and Israel have already identified a range of targets in Iran, aiming to deal a severe blow to the country’s economy and make the process of Iran’s leadership recovering from this war long and painful.

An Israeli official said Israel is waiting for Washington to issue authorization this week to begin striking Iran’s energy facilities, a move that could seriously damage the capacity of this major global oil and gas producer. In an interview Sunday, President Trump said the United States is ready to destroy all of Iran’s bridges and power plants, and that even if Iran is “lucky and the country still exists,” it would take 20 years to rebuild.

In recent days, the U.S. and Israel have stepped up strikes on non-energy targets. Targets have included Iran’s largest steel plant, petrochemical plants, and a landmark bridge.

Avner Golov, deputy vice president of the current advisory organization MIND Israel and a former Israeli national security official, said: “They are sending a signal: we are firm in our stance. If Iran continues to refuse to agree to end the war, its economy will pay an increasingly high price.”

Attacking civilian infrastructure may violate international law. U.S. and Israeli officials, however, say these targets are legitimate targets because the supplies they produce are for use by Iran’s military.

Shifting the focus of strikes to infrastructure may cause this conflict to evolve into an economic war of attrition.

Iran’s Islamic Revolutionary Guard vowed that if Trump carries out his threat, it would intensify attacks on civilian infrastructure in Israel and the countries of the Persian Gulf.

Earlier, Iran carried out retaliatory attacks on its own infrastructure. It struck petrochemical facilities in Bahrain and Abu Dhabi, as well as oil, water desalination, and power infrastructure in Kuwait. On Sunday, Iran attacked the industrial zone of Nيوتot Howav in southern Israel, an area that hosts multiple factories. Israeli authorities said that a few days earlier, Iran’s missile debris hit Israel’s largest refinery in Haifa, but production at the plant site was not interrupted.

In a post on the X platform on Sunday after Trump issued threats, Mohammad Bagher Qalibaf, speaker of Iran’s parliament, wrote: “Your reckless acts are dragging the United States into an apocalyptic hell that every household is trapped in—simply because you insist on following instructions from Netanyahu, and the entire region will be engulfed in war.”

In recent days, the non-energy targets hit by the U.S. and Israel have included this landmark bridge.

Iran’s attacks on energy facilities in the Gulf region could have long-lasting effects on global energy prices. Oil prices have risen to their highest level since 2022, and with tankers stuck in the Persian Gulf, there is still a risk of continued increases.

Insiders said mediators are stepping up efforts to bring Iran and the United States back to the negotiating table, but so far to no avail. Iran rejected a proposal to lift the blockade of the Strait of Hormuz in exchange for a temporary ceasefire.

Razz Zimit, director of the Iran program at the Israeli National Institute for National Security in Tel Aviv, said: “At present, it appears Iran is willing to absorb greater economic losses, as long as it can continue to seriously weaken its opponent.”

Zimit said: “They have made preparations to take on risks.”

Robin Mears, CEO of Kamal Energy, a Dubai consulting firm, said that even if Iran gives up control of the Strait of Hormuz, if petrochemical and other energy facilities are severely damaged, the Gulf region’s supplies would be unable to be shipped out.

Mears said: “Even if shipping returns to normal, the Gulf region’s daily supply of about 5 million barrels of refined oil products would be cut off for months—maybe even longer.”

The Iranian economy targeted by the U.S. and Israel was already struggling due to sanctions imposed by the West over many years in connection with its nuclear program, ballistic missile development, and support for terrorist organizations the U.S. has designated. Iranian residents said the war has already pushed domestic economic activity to a new low.

Several Iranian residents said in interviews that after factories were bombed they were shut down one after another, food prices soared, and unemployment rose. They worry the war cannot overturn the Islamic regime—(earlier this year the regime suppressed thousands of protesters)—and would only harm ordinary people. They also said that Trump and Israeli Prime Minister Benjamin Netanyahu have called on these people to overthrow the current government.

Thick smoke and flames rise after the attack on Iran’s South Pars gas field in Bushehr Province.

South Pars is one of the core economic targets in Iran that has been attacked.

Israel’s attacks on Iran’s economic facilities mainly focus on steel, petrochemicals, and pharmaceuticals—industries that generate tens of billions of dollars in annual revenue for Iran.

On Saturday, Israel attacked Iran’s Mahshahr core petrochemical complex. The Israeli military said the facility produces and exports chemical raw materials for Iran’s armed forces. Last week, Iran’s official media said the petrochemical plant in Tabriz was hit.

A energy expert at the Chatham House think tank in the UK, Neil Qualian, said the petrochemical industry is a pillar of Iran’s economy, contributing about 25% of total non-oil export revenue. Qualian said that unlike oil, which is transported by large tankers and is easier to monitor and subject to sanctions, petrochemical products can be sold to private buyers in Asia, Turkey, and other places, making them an important source of foreign currency for Iran.

Qualian said: “These facilities provide key raw materials to industries such as textiles, automotive parts, and packaging. After they are hit, they will cause bottlenecks in manufacturing output, drive up costs, and lead to large-scale unemployment.”

On Sunday, Israeli Defense Minister Israel Katz said that over the past two years, Iran’s petrochemical industry has brought in about $18 billion in revenue for the Islamic Revolutionary Guard Corps.

Last week, Israel struck at the core of Iran’s steel industry, including the Khuzestan Steel Plant in the city of Ahvaz and the Mobarakeh Steel Plant in the city of Isfahan—both of which are among the largest steel production bases in the region.

In a statement in 2024 regarding the Khuzestan Steel Plant, the U.S. Treasury said Iran’s metals industry earns billions of dollars each year, with most of it coming from steel exports. The two plants have both been sanctioned by the United States for their association with Iran’s security organizations.

On Tuesday, the Israeli military said it attacked the Tofigh Daru pharmaceutical plant in Tehran.

Iran has also gained some economic benefits from the war: including continuing to export crude oil at high prices even when it is unable to export oil to other countries; the U.S. government easing oil export exemptions, allowing India for the first time in many years to purchase oil from Iran; and in addition, Iran charges transit fees to ships passing through the Strait of Hormuz.

But Zimit said these benefits are far less than the damage the war has done to Iran’s economy.