Invisible Hand Behind Iran War

The latest round of hostilities involving Iran, Israel, and the United States raises a question that mainstream discourse appears reluctant to confront: if elected leaders are truly in control, why do military actions so often proceed in defiance of political declarations?

President Donald Trump publicly urged restraint and claimed that he "calls all the shots." Yet Israeli strikes followed almost immediately. The episode exposed a contradiction that has become increasingly common in international politics. Governments speak the language of diplomacy while military escalation continues unabated.

Perhaps the real issue is not whether Washington controls Tel Aviv or vice versa. The more important question is whether both are operating within a framework dictated by interests far larger than individual politicians.

For decades, every major crisis in the Middle East has produced the same winners. Defense industries secure larger contracts. Security establishments gain expanded powers. Energy markets remain vulnerable to disruption. Strategic planners find justification for maintaining military footprints across the region. Meanwhile, ordinary citizens pay the price through economic hardship, displacement, and insecurity.

Iran has become the latest target of this entrenched system. Officially, the objective is to halt Tehran's nuclear ambitions and neutralize its missile capabilities. Yet the scope of military pressure suggests broader ambitions. The weakening of the Iranian state, the containment of its regional influence, and perhaps even the eventual collapse of the current political order appears to be equally important goals.

The implications extend beyond the Middle East. Any disruption involving the Strait of Hormuz threatens global energy flows and places additional pressure on emerging economies. China, one of the largest consumers of Iranian energy, stands to lose from prolonged instability. In this context, the conflict increasingly resembles a chapter in a wider geopolitical contest rather than a narrowly defined security operation.

What makes the situation particularly troubling is the growing irrelevance of public accountability. Leaders change, governments come and go, yet the direction of policy remains remarkably consistent. Escalation follows escalation, regardless of electoral promises or diplomatic rhetoric.

One does not need to believe in secret conspiracies to recognize this pattern. A powerful nexus of military, economic, and geopolitical interests has repeatedly demonstrated its ability to shape outcomes. Whether it is called an establishment, a strategic network, or an informal cartel of influence, its fingerprints are visible across the region.

The tragedy is that while nations debate who fired the latest missile, few ask who benefits from a conflict that never seems to end.

OPEC+ to raise oil output by 188,000 bpd

Seven OPEC+ countries have agreed to increase their combined crude oil output targets by 188,000 barrels per day (bpd) in July. This is the same as the June hike, which was adjusted down from monthly increases of 206,000 bpd in May and April to ⁠take into account the UAE exit.

The decision was taken by the countries—Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman—during their virtual meeting held on Sunday to review global market conditions and outlook.

This increase marks the fourth monthly quota hike under the group's phased unwinding of voluntary supply cuts, though the physical realization of these barrels currently remains limited due to the blockade of the Strait of Hormuz.

Seven OPEC+ countries have increased their output quotas from April to June this year by almost 600,000 barrels per day. In their collective commitment to support oil market stability, the seven countries decided to implement a production adjustment of 188,000 bpd from the additional voluntary adjustments announced in April 2023. This adjustment will be implemented from next month.

The additional voluntary adjustments announced in April 2023 may be returned in part or in full subject to evolving market conditions and in a gradual manner. The countries will continue to closely monitor and assess market conditions, and in their continuous efforts to support market stability, they reaffirmed the importance of adopting a cautious approach and retaining full flexibility to increase, pause or reverse the phase out of the voluntary production adjustments, including reversing the previously implemented voluntary adjustments announced in November 2023.

The seven OPEC+ countries noted that this measure will provide an opportunity for the participating countries to accelerate their compensation. These countries reiterated their collective commitment to achieve full conformity with the Declaration of Cooperation, including the additional voluntary production adjustments that will be monitored by the Joint Ministerial Monitoring Committee (JMMC).
They also confirmed their intention to fully compensate for any overproduced volume since January 2024. The compensation period will be extended until the end of December 2026.

Sovereignty, Security and Selective Silence

Saudi Arabia's condemnation of Iranian attacks on Kuwait and Bahrain is understandable. Any attack against a neighboring Gulf state threatens regional stability and raises legitimate concerns about security. Riyadh's warning that such actions could push the region toward greater instability reflects the anxieties of governments and citizens alike.

Yet the latest crisis exposes a deeper question that deserves serious debate across the Gulf.

The Kingdom and its GCC partners have been swift in condemning Iranian military actions. However, they have been far more restrained when it comes to criticizing US attacks on Iran, many of which originate from military facilities located within GCC countries. This raises an uncomfortable but important question. Is sovereignty being defended as a universal principle, or is it being interpreted through the lens of strategic alliances?

The issue is not whether Iran should be held accountable for actions that threaten regional peace. It should. The real issue is whether the same standards are applied consistently to all actors.

For decades, Gulf states have justified hosting US military bases as a necessary component of their security architecture. The arrangement has undoubtedly provided strategic protection. However, it has also created a paradox. Facilities intended to enhance security may simultaneously transform host nations into potential targets whenever confrontation erupts between Washington and its adversaries.

This dilemma goes beyond the Gulf. It touches the very meaning of sovereignty in the modern world. Sovereignty is not merely the defense of territorial borders; it is also the ability to exercise independent control over how national territory is used. If military operations against a third country are launched from bases located within a sovereign state, can that state genuinely claim neutrality in the resulting conflict?

Supporters of the current security framework argue that these operations occur with the consent of host governments and therefore do not violate sovereignty. Critics counter that consent alone does not eliminate responsibility for the consequences that follow.

The Gulf's leaders frequently call for dialogue, restraint and de-escalation. These are worthy objectives. Yet lasting credibility requires a consistent approach. Condemning attacks from adversaries while remaining silent about military actions conducted by allies inevitably invites questions about selective outrage.

The debate, therefore, is not about choosing between Washington and Tehran. It is about determining whether sovereignty is a principle to be upheld universally or a concept applied selectively when political convenience demands it.

Trading at PSX driven by US-Iran conflict

The benchmark Index of Pakistan Stock Exchange (PSX) continued its positive momentum in May 2026 for the second consecutive month as the US and Iran moved closer to clinching a deal. The absence of additional revenue measures in the upcoming budget, amid the uncertainty created by the recent US-Iran conflict boosted investors’ confidence. Technology, Cement, and OMC sectors delivered the strongest positive returns while refineries remained negative during the month under review.

The Index continued its positive momentum for the second consecutive month as the US and Iran moved closer to clinching a deal that could pave the way for the reopening of the Strait of Hormuz. Consequently, the Index gained 6.7% (6.8% in US$ terms) during May. However, market liquidity contracted by 20.6% on sequential basis as average daily traded volume declined to 929 million shares from 1,170 million shares in April 2026 due to Eid effect. Average daily traded value also dropped by 22.2% to PKR41.8 billion (US$150 million) from PKR53.7 billion (US$192.7 million) in April 2026.

The absence of additional revenue measures in the upcoming budget, amid the uncertainty created by the recent US-Iran conflict boosted investor confidence. Analysts expect the government's focus to remain on increasing revenue through enforcement measures while curtailing expenditures, which would continue to be the mainstay of its fiscal strategy.

Pakistan’s role as a mediator in the ongoing US-Iran conflict supports the view that the country’s increasing importance in the GCC is likely to improve its global standing and help attract foreign investment. However, any adverse development in the US-Iran conflict could become a source of concern for investors.

Technology, Cement, and OMC sectors delivered the strongest positive returns, driven by improving IT exports, continued robust domestic demand, and higher inventory gains. The Technology sector posted a return of 15.6% in May, followed by OMCs and Cement, which generated returns of 10.7% and 10.0% respectively. The Fertilizer sector also reported a strong return of 8.8%, supported by healthy offtakes and attractive dividend yields. As against this, Refineries sector posted a negative return of 1.2% during the month following the government's decision to fix margins on certain petroleum products to provide relief to consumers.

Insurance and Brokers remained net buyers in May, accumulating equities worth US$12.8 million and US$5.5 million, respectively, amid expectations of a US-Iran deal. Conversely, Companies, Banks, and Mutual funds remained net sellers as funds shifted toward fixed-income securities following policy rate increase by the central bank in April 2026. Foreign investors also remained net sellers due to geopolitical tensions and rising concerns over currency depreciation across emerging and frontier markets amid inflationary pressures in developed economies resulting from the Middle East conflict. Net foreign selling was recorded at US$17.2 million, primarily in the banking sector (US$14.1 million), followed by the cement sector (US$5.4 million).

 

PSX benchmark index down 2.0%WoW

Pakistan Stock Exchange (PSX) remained volatile during the week ended on June 05, 2026, due to the evolving US-Iran negotiations and movements in international oil prices. The benchmark Index was down 3,484 points or 2.0%WoW to close at 170,479 on Friday.

Investor sentiment weakened at the start of week on the news of probable halt in US-Iran talks after Israel attacked Lebanon, and inflation came in above policy rate at 11.7%YoY, taking real interest rates into positive territory after 26 months. Brent crude was up 5.9%WoW to US$98.9/ bbl.

On the macroeconomic front, Pakistan's trade deficit for May 2026 decreased by 14%YoY and 39%MoM to US$2.6 billion, led by 6.6%YoY and 21%MoM decrease in imports.

FBR's provisional tax collection for 11MFY26 was reported at PKR11.2 trillion, reflecting a shortfall of PKR25 billion against the revised target.

Foreign exchange reserves of State Bank of Pakistan (SBP) increased to US$17.2 billion as of May 29.

Cement dispatches for May 2026 declined by 21%YoY to 3.8 million tons, mainly due to Eid holidays amid higher fuel prices

OMC offtakes declined by 23%YoY to 1.17 million tons during the month, led by lower HSD offtakes.

Other major news flow during the week included: 1) GoP announced PKR290/ US$ exchange rate for the FY27 budget, alongside a GDP growth of 4% and inflation, 2) Pakistan secured three Qatari and one spot LNG cargo, 3) FCC questioned Punjab's royalty levy on cement, 4) OGDC made an oil and gas discovery at Bobi Deep-1, and 5) NEPRA approved a PKR1.99/unit relief.

Top performing sectors were: Synthetic & Rayon, and Modarabas, while laggards included: Power Generation, Oil & Gas Exploration, and Vanaspati & Allied Industries.

Major selling was recorded by Mutual Funds of US$19.5 million, while buying was recorded by Individuals of US$16.5 million. Top performing scrips were: HCAR, PSX, GHNI, IBFL, and PGLC, while laggards included: GHGL, NBP, APL, ENGROH, and PKGS.

According to AKD Securities a constructive resolution to the US-Iran conflict, alongside the trajectory of international oil prices, would remain the pivotal near-term catalysts for market direction.

The upcoming FY27 federal budget, scheduled for June 10, would remain a key focus for the market. Market continues to trade at attractive valuations.

Top picks of the brokerage house include: OGDC,

PPL, UBL, MEBL, HBL, FFC, ENGROH, PSO, LUCK, FCCL, INDU, ILP and SYS.

Foreign Bases and Price of Hosting

For decades, several Arab countries have hosted American military bases under defence and security agreements. Their governments have justified these arrangements as essential for national security, regional stability, and deterrence against external threats. Few questioned the logic when the bases appeared to serve a defensive purpose. The debate becomes far more complicated when those same facilities are used to launch offensive military operations.

The military confrontations involving the United States and Iran during 2025 and 2026 have brought this issue into sharp focus. According to various reports, American forces used bases located in Arab countries to conduct operations against Iran. Tehran responded by targeting facilities linked to the American military presence in the region.

The reaction was immediate. Host governments condemned the strikes as attacks on their sovereignty, while much of the Western media adopted the same narrative. Yet this raises an uncomfortable question: can a country allow its territory to be used as a launch pad for attacks on another state and still claim complete detachment from the consequences?

To be clear, international law recognizes the sovereignty of the host state over its territory. A foreign military base does not magically become American soil. However, sovereignty is not merely a legal concept; it also carries responsibility. When a government permits a foreign power to use facilities within its borders for offensive operations, it knowingly becomes part of a broader strategic equation.

This does not mean every retaliatory strike is lawful or justified. Nor does it absolve the attacking party of responsibility for escalation. But it does challenge the simplistic narrative that the host countries are innocent bystanders with no connection to the conflict.

The real issue is consistency. Governments cannot celebrate the security benefits of hosting powerful foreign militaries while disowning the risks that inevitably accompany such arrangements. Strategic partnerships bring strategic consequences.

The Middle East deserves a more honest discussion about these realities. If foreign bases are strictly defensive assets, they should not be used to project military force against neighbouring states. If they are used offensively, then regional governments must acknowledge that they have assumed a degree of political and strategic responsibility. Sovereignty is not only about rights; it is also about accountability.

Israel’s Security Paradox: Strength Without Psychological Closure

Benjamin Netanyahu’s long political dominance has coincided with one of the most turbulent phases in Israel’s modern security history. For his supporters, he represents strategic clarity in a hostile region. For critics, his era reflects the entrenchment of a permanent conflict mindset. Both interpretations, in different ways, touch the same underlying reality - Israel’s security condition today is defined as much by perception as by power.

Militarily, Israel remains one of the most capable states in the Middle East. Its intelligence infrastructure, air power, and multi-layered defence systems have significantly strengthened deterrence. Several adversaries are either weakened, fragmented, or operating under constraints not seen in previous decades. From a purely conventional standpoint, Israel’s strategic position appears more secure than in many earlier phases of its history.

Yet this is only one side of the equation. On the ground, security is not experienced in abstract balances of power. It is experienced through sirens, shelters, alerts, and the unpredictability of escalation. For civilians—particularly children growing up amid periodic conflict—security becomes a lived rhythm rather than a stable condition. Even when attacks are intercepted or contained, the psychological imprint of uncertainty remains. This is where Israel’s central paradox emerges - growing military strength has not translated into a proportional sense of psychological security.

The reason lies in the changing nature of conflict. Traditional wars between defined states have increasingly been replaced by asymmetric threats—rockets, proxy forces, cross-border raids, and regional instability. These forms of confrontation do not require parity to create disruption; they require only unpredictability. As a result, even a militarily dominant state can remain socially alert, frequently mobilized, and psychologically exposed.

Within Israeli society, this produces a dual perception. One strand believes Israel is stronger than ever, capable of managing multiple fronts simultaneously. Another strand, equally present, sees a country that remains encircled not necessarily by conventional armies, but by persistent and evolving threats that rarely disappear entirely.

Netanyahu’s political approach has reinforced this condition of “managed insecurity”—a doctrine in which deterrence is maintained not by eliminating threats, but by continuously containing them. This may strengthen strategic positioning in the short term, but it also prevents a full transition from conflict management to post-conflict normalcy.

The result is a society that oscillates between confidence and anxiety. Military superiority coexists with civilian vulnerability. Tactical successes coexist with strategic uncertainty. And periods of calm are often interpreted not as resolution, but as interludes between escalations.

The question is not whether Israelis believe their enemies are weaker or stronger. The more accurate question is whether they believe threats can ever be fully removed from their horizon.

For many, the answer remains uncertain. And it is in that uncertainty—more than in battlefield outcomes—that Israel’s modern security condition is ultimately defined.