Kuwait power plant attacked, Iraqi gas fields shut down: US-Iran conflict crosses the "civilian red line," crude oil rises nearly 16% in a week

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Energy infrastructure and civilian facilities have successively become targets, marking the entry of the US-Iran conflict into a new and dangerous phase.

Kuwait on Friday stated that Iran had extended the scope of its attacks to include Kuwait's power and desalination plants. Iraqi officials on Thursday said that the largest natural gas field in the country's northern Kurdish region had been shut down due to threats of attack, while US forces expanded their airstrike targets to Chabahar port, over 350 miles from the Strait of Hormuz. Neither side has shown any signs of backing down.

Traffic through the Strait of Hormuz has fallen to a three-week low, and international crude oil futures have surged by double digits this week. By Friday's close, Brent and WTI front-month contracts were up about 15.9% and 15.5% for the week, both closing at one-month highs for the fourth consecutive day this week.

The performance of oil prices shows that the market is rapidly pricing in concerns about the conflict spilling over further—this round of escalation is no longer limited to bilateral military confrontation but is now starting to affect the livelihood and energy lifelines of neighboring countries. Saeid Golkar, an Iran security expert at the University of Tennessee at Chattanooga, warned that the situation is rapidly spiraling out of control: "Even if both sides (the US and Iran) do not want all-out war, we still face the risk of a return to total war."

Civilian Infrastructure Targeted for the First Time

Media outlets believe that the most significant change in this round of escalation is that the conflict has crossed the "civilian red line" previously tacitly observed by both sides.

The Kuwaiti government stated Friday that an Iranian drone attack damaged a power and desalination plant. Amid intense summer heat, the attack forced Kuwait to launch emergency response measures and was highly provocative. Kuwait's military said it had intercepted 32 drone attacks since early Thursday morning.

Meanwhile, according to Iraqi officials, drones attacked an oil tanker and a container ship at the country's southern port on Thursday, as well as the northern Kurdish region. The largest natural gas field in the region later announced shutdown due to a "credible threat of attack." The Kurdish region said more drones were intercepted over its capital, Erbil, on Friday. So far, no parties have claimed responsibility for attacks inside Iraq, but Iran and its local allies have previously launched frequent drone attacks in the region.

Iran has also begun targeting Qatar and Oman—two countries actively engaged in diplomatic mediation—and has ramped up attacks on passing ships.

US Strikes Move Inland, Chabahar Port Hit

The US military has also broken previous operational boundaries, extending targets from along the strait into Iran's interior.

US Secretary of Defense Hegseth publicly released a photo of a collapsed maritime communications tower at Chabahar port. Located over 350 miles east of the Strait of Hormuz, near the Pakistan border, it is Iran’s only deep-water ocean port. Iranian authorities confirmed the facility was attacked, insisting it was strictly civilian, including for fishing vessel sea rescue operations. Former British navy officer Chris Long, who served in the Persian Gulf, said the tower may also have surveillance and intelligence-gathering functions.

At Bandar Abbas, at the other end of the Strait of Hormuz, US forces targeted multiple bridges for several nights, aiming to cut supply routes to this strategic port and naval base. Iranian state broadcaster IRIB reported that several bridges in Bandar Abbas and surrounding areas were hit, and highways connecting the port city to neighboring provinces were announced closed.

According to The Wall Street Journal citing US officials, Iran has used facilities at this port to launch attacks on ships. Bandar Abbas typically handles 90% of Iran's container shipments.

The US military reportedly has conducted airstrikes for six consecutive days—making this the largest escalation since a preliminary agreement was signed in June this year. Besides bridges, targets include weapons and surveillance systems used by Iran to attack commercial vessels, such as small speedboats, coastal radar stations, air defense systems, and missile and drone storage facilities.

Strait Traffic Disrupted, Oil Price Risk Premiums Repriced

The deepening military conflict has directly impacted global energy markets.

According to ship tracking agency Kpler, traffic through the Strait of Hormuz has fallen to a three-week low, with half of transiting vessels currently Iranian, and most traffic using routes along the Iranian side. Separately, Britain’s Maritime Trade Operations (UKMTO), an agency affiliated with the Royal Navy, reported that another vessel near the strait was hit by an unidentified projectile on Friday.

International oil prices have risen more than 10% this week. Trump had previously made clear that he is concerned about the impact of rising oil prices on the global economy.

The origins of this round of conflict can be traced back to a memorandum of understanding between Trump and Iran a month ago—the agreement was originally intended to open passage through the Strait of Hormuz, but after Iran launched a new round of attacks against US convoys seeking to escort ships along the coast of Oman, the agreement collapsed last week. Iran insists the agreement gave it the right to manage traffic through the Strait and demanded that ships use the northern route along the Iranian coast.

Both Sides Have Reasons for Restraint, But Spiral of Escalation Grows

Despite continued deterioration, both sides have practical reasons to avoid total war.

Iran faces immense postwar reconstruction pressure, and domestic dissatisfaction with the government is intensifying. The Trump administration faces political pressure over soaring oil prices impacting the US economy.

Earlier this week, US officials said Trump preferred expanding military action to break diplomatic deadlock. According to flight tracking data and an informed source, US forces are redeploying jet fighters from Europe to the Middle East. Additionally, over 2,000 Marines from the 11th Marine Expeditionary Unit are already operating in the region, and published photos show them conducting boarding inspections of a merchant ship in the Gulf of Oman, to strengthen the blockade of Iranian ports.

In a prime-time TV address Thursday night, Trump said, “We have also made significant victories in Iran, and you will soon see the results of these efforts.”

However, Saeid Golkar’s assessment was more cautious. He noted that Tehran's consistent strategy is to suppress its adversary with higher-intensity escalation and wear down the US through a war of attrition. As both sides vie for leverage and neither wants to back down first, the risk of an out-of-control escalation spiral has become a core, unavoidable market risk.

Risk Warning and DisclaimerThe market involves risk, and investments require caution. This article does not constitute personal investment advice and does not take into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investment decisions made accordingly are at your own risk. ```