By Nouriel Roubini, Project Syndicate | June 23, 2025
Radical forces in the Middle East, many funded by and acting as proxies of Iran, have destabilized the region for decades. Regime collapse in Iran following the US bombardment of the country’s nuclear facilities, it must now be hoped, will benefit the entire region.
NEW YORK – Last November, I predicted that Israel was likely to attack Iran’s nuclear and other military facilities, even go so far as to eliminate the “regime’s top military and political leaders.” I also argued that “any US administration would inevitably continue to support [Israel], directly or indirectly.”
Regardless of the deep divisions within Israel about the conduct of war in Gaza, the broad consensus across the Israeli political spectrum – including center-left critics of Prime Minister Binyamin Netanyahu – was that Iran was close to developing a nuclear weapon, a perceived existential threat to Israel. If anything, moderate centrist leaders such as Benny Gantz and Yair Lapid criticized Netanyahu for being soft on Iran.
It was only matter of time before Israel struck Iran, which, starting on October 7, 2023, had unleashed Hamas, Hezbollah, Yemen’s Houthis, and Shia militias in Syria and Iraq against Israel. After Israel decimated these proxies and Iran lost strategic deterrence, Iran’s only option was to gain nuclear weapons, an unacceptable outcome for Israel and the West more broadly. Thus, Israel’s attack against Iran. And since some of Iran’s hardened nuclear facilities were robust enough to withstand Israeli weapons, it was clear that the US would intervene to destroy the nuclear facilities, despite the anti-interventionist sentiment of President Donald Trump’s base.
Iran counterattacked Israel with missile barrages and now threatens US forces in the region. But the regime is so weakened that it can barely defend itself, let alone unleash its limited weapons against US forces. Yes, some Shia militias can try to attack well-defended US bases and troops in the region. But, leaving aside the risk of even more forceful US and Israeli counterattacks, the damage they can do is limited.
Also, the Iranian regime’s ability and willingness to block the Strait of Hormuz, to mine the Persian Gulf, and/or to attack the energy production facilities and pipelines of its Arab neighbors is now limited. The regime is focusing on its survival, but its collapse is likely in the coming months.
True, for now Israel’s attack has led even the anti-regime opposition to rally around the flag. Over time, however, a large majority of Iranians who despise a regime that has brought about the country’s economic and financial ruin – and now its geopolitical and military collapse – will rise against it and replace it with something else. In 1990, Iran’s per capita GDP was almost equal to that of Israel; today, Israel’s is nearly 15 times higher. Iran’s energy reserves rival, or even exceed, Saudi Arabia’s, yet it has lost hundreds of billions of dollars in potential energy revenues in a futile war against the West over the past five decades.
Today, Iranians face skyrocketing inflation, collapsing real incomes, mass poverty, and even hunger not because of US and Western sanctions but because of their rulers’ nonsensical policies. A country that could have been richer than any Gulf oil state is near bankruptcy, owing to the regime’s corruption, incompetence, and strategic recklessness.
In addition to being a curse to its own people, the Islamic Republic has financed terrorist groups in the Middle East for decades and has caused state failure or semi-failure across the region: in Yemen, Lebanon, Syria, Gaza/Palestine, Iraq. Stabilization and recovery of failing and failed states in the Middle East now requires regime change in Iran. The Iranian people – not outside forces – will trigger it in the next year. Iranians have revolted against their regime at least a half-dozen times in the last few decades, and, when given the chance, they have always chosen moderate leaders over theocratic zealots.
For now, financial markets are correctly betting that the global impact of this recent war is likely to be minimal. Current movements of oil prices, US and global equities, US and global bond yields, and currencies suggest that a major stagflationary shock coming from a severe disruption of production and energy exports from the Persian Gulf remains only a tail risk, not the baseline scenario.
The 1973 Yom Kippur War and Iran’s Islamic Revolution in 1979 led to a massive spike in oil prices that fueled the severe stagflations of 1974-75 and 1980-82. This time is likely to be different for many reasons: the energy input in consumption and production in oil-importing economies is much lower than in the 1970s; the US and other major new non-OPEC energy producers have emerged; Saudi Arabia and others are able to tap large excess production capacity and inventories.
And in case oil prices rise as US involvement in this war creates new risks, a variety of macro policies and other tools can be used to reduce the stagflationary impact.
A nuclear Iran would have been a threat not just to Israel but all Sunni regimes in the Middle East, as well as nearby Europe and eventually the US. German Chancellor Friedrich Merz said what many other world leaders think but don’t want to admit in public: “Israel is doing the dirty work for all of us.” Even China and Russia – Iran’s de facto allies – have shown restraint.
Radical forces have destabilized the Middle East for decades, with spillover effects – via terrorism, state failure, and mass migration – on Europe and the West. It now took Israel to weaken and then destroy the Shia radicals and their proxies.
Regime collapse in Iran, it should be hoped, will boost stability and allow for reconstruction in the region, with normalization of diplomatic relations between Israel and Saudi Arabia. A new government in Israel more open to peace with the Palestinians and an eventual two-state solution will then be possible. But for that to happen, the Iranian Hydra needs to be replaced with a rational regime eager to rejoin, rather than attack, the international community.
Nouriel Roubini, a senior adviser at Hudson Bay Capital Management LP and Professor Emeritus of Economics at New York University’s Stern School of Business, is Co-Founder of Atlas Capital Team, CEO of Roubini Macro Associates, Co-Founder of TheBoomBust.com, and author of Megathreats: Ten Dangerous Trends That Imperil Our Future, and How to Survive Them (Little, Brown and Company, 2022). He is a former senior economist for international affairs in the White House’s Council of Economic Advisers during the Clinton Administration and has worked for the International Monetary Fund, the US Federal Reserve, and the World Bank. His website is NourielRoubini.com, and he is the host of NourielToday.com.
Copyright Project Syndicate
TIPP Takes
Geopolitics, Geoeconomics, And More
1. How Badly Have U.S. Strikes Damaged Iran’s Nuclear Facilities? TIPP Insights
President Donald Trump says that U.S. strikes “totally obliterated” three key nuclear sites in Iran, but independent analysis has yet to verify that claim.
2. Iran Weighs Retaliation For United States Attack - TIPP Insights
Iran will be mulling over options on how to respond to the U.S. attack, from striking U.S. bases in the region, to blocking a key global shipping waterway – but all carry the risk of further retaliatory aggression.
3. Trump Claims "Bullseye" On Iran Nuclear Sites, Floats Regime Change - TIPP Insights
President Donald Trump posted on Truth Social that recent strikes on Iran caused "monumental damage" to its nuclear facilities, citing satellite imagery. “Obliteration is an accurate term!” he wrote.
Nine hours earlier, Trump made a separate post suggesting regime change in Tehran. “It’s not politically correct to use the term ‘regime change,’ but if the current Iranian Regime is unable to make Iran great again, why wouldn’t there be a regime change???” he wrote, ending the post with “MIGA!!!”
4. Iran Strikes The Largest U.S. Military Base In Qatar In Retaliation - TIPP Insights
Iran launched missile attacks on U.S. military installations in Qatar and Iraq, escalating tensions days after American airstrikes on Iran’s nuclear facilities.
The Islamic Republic said its strike on Qatar’s Al Udeid Air Base involved six missiles — the same number used in the U.S. attack — to signal a desire to de-escalate. Iranian state TV hailed it as “a mighty and successful response” to “America’s aggression.” Qatar briefly closed its airspace prior to the strike.
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Speaking on CNBC’s Squawk Box, Mullin said both Iran and Israel claimed sensitive materials were relocated prior to the strike, but U.S. agencies found “they didn’t.” “In fact, we believe they stored more in Fordo because they thought it was impenetrable,” Mullin said.
6. Russia: Other Nations Ready To Supply Iran With Nukes After U.S. Strike - UPI
In the wake of President Donald Trump's strike on Iran's nuclear sites, former Russian President Dmitry Medvedev said that "a number of countries" are ready to directly supply Iran with their own nuclear weapons.
"What have the Americans accomplished with their nighttime strikes on three nuclear sites in Iran?" Medvedev questioned in a post on social media. "The enrichment of nuclear material – and, now we can say it outright, the future production of nuclear weapons – will continue. A number of countries are ready to directly supply Iran with their own nuclear warheads."
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Ukrainian President Volodymyr Zelensky denounced a series of Russian missile and drone attacks that struck civilian infrastructure across Ukraine, including Kyiv and Odesa.
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8. Trump ‘Still Interested’ In Iran Diplomacy: White House - Al Arabiya
Donald Trump thinks Iranians should overthrow their government if it refuses to negotiate on its nuclear program, but the U.S. president is “still interested” in diplomacy, the White House said.
U.S. officials have warned Iran against hitting back at the U.S. and Trump said after the strikes that any retaliation by Iran against the U.S. would be met with a force far greater than that used in the weekend U.S. attacks.
9. U.S. Asks China To Stop Iran From Closing Strait Of Hormuz - BBC
Secretary of State Marco Rubio has called on China to prevent Iran from closing the Strait of Hormuz, one of the world's most important shipping routes.
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The statement from the State Department does not mention the Saturday night attack but acknowledged that "there is the potential for demonstrations against U.S. citizens and interests abroad.
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The alliance's 32 member states agreed to the plan in advance of a heads of nations summit this week in The Hague. The meeting is scheduled to take place Tuesday and Wednesday, where the new spending increase is expected to be approved.
13. Caught Off-Guard By U.S. Strikes On Iran, Europe Still Looking For Role - RFE/RL
Europe is still looking for a role in the Israel-Iran conflict after it was caught by surprise following the United States’ strikes on Iran over the weekend.
But it is fair to say they say there is a sense of humiliation as the American attack on various nuclear facilities in Iran came some 24 hours after the foreign ministers of the E3 (France, Germany, the United Kingdom) and the EU foreign policy chief Kaja Kallas met with their Iranian counterpart Abbas Araqhchi in Geneva on June 20.
14. Most Germans Want Independent European Nuclear Deterrent - D.W.
According to a new Forsa poll, nearly two-thirds of Germans now support the idea of a European nuclear deterrent that doesn't rely on the U.S.
Support stands at 64%, with solid backing across age groups, regions, and party lines — something rare in German foreign policy debates. German Chancellor Friedrich Merz had already floated the idea before taking office, eyeing talks with France and the UK to build a joint nuclear strategy for Europe amid Trump-era uncertainty.
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Pompliano said in a statement that his financial services firm ProCap BTC would merge with Columbus Circle Capital I, a special purpose acquisition company, to create ProCap Financial, a bitcoin treasury firm. Pompliano is one of the biggest investors in the crypto space over the last several years.
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