How Israel Strategically Bankrupted Iran

The Axis of Resistance is all but broken and Iran is desperately exposed

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For over four decades, Iran has crafted a network of proxy militias across the Middle East to project power and encircle its adversaries, particularly Israel. This “ring of fire” was designed in part to allow Iran the strategic time and space it needed to develop its most important asset, a nuclear weapon that would lend it ultimate deterrence until the Islamic Republic ascended to its place as a legitimized global power on the world stage.

With the October 7 attack last year, it appeared that Iran, through the actions of its Palestinian proxy, Hamas, had delivered its coup de grâce. Israel’s response to Hamas’ invasion appeared to derail the country’s normalization talks with Saudi Arabia, which would have fully aligned the Jewish state with many of its most powerful former Arab enemies—Saudi Arabia, Bahrain, UAE, with more likely to come—who also happen to be Iran’s chief adversaries in the Muslim world. The ring of fire was burning hot, and Israel was trapped.

But over the past year—and culminating in the extraordinary gains Israel has made against Hezbollah in just the past few weeks—Israel has not simply disrupted Iran’s grand strategy but turned it on its head, transforming what was its greatest strength into a glaring weakness. The Axis of Resistance is all but broken and Iran is desperately exposed. Most importantly, Israel is readying to exploit this historic vulnerability.  

It’s astonishing to realize how close Iran came to achieving its dark vision. Militarily, it established and supported groups like Hezbollah in Lebanon, Hamas in Gaza, the Houthi rebels in Yemen, and various Shia militias in Iraq and Syria, giving it a powerful deterrent effect from any direct attacks on its soil. This Axis of Resistance was designed to keep Israel preoccupied and hesitant to strike Iran directly, giving the ability to advance its nuclear ambitions. Obama’s years-long push to forge—and, in many ways, force—a nuclear deal with Iran conferred on the revolutionary republic a level of legitimacy its founders could have only dreamt of. The resulting deal, the Joint Comprehensive Plan of Action of 2015, specifically allowed for Iran to obtain non-weapons nuclear capabilities after an extended waiting period, all under a wink-wink acknowledgment that one of the world’s biggest oil producers was doing this to pursue civilian energy projects. 

The real calculus behind Iran’s push for nukes is that, with the technology it needs to pursue weapons, Iran would be able to leverage its strength to quickly close the gap between nuclear breakout and the development of a nuclear warhead. In this scenario, Iran would achieve supreme deterrence. Given the messianic zeal of their regime, the ayatollahs in possession of nukes would be seen as having a willingness to use them. With the US in Iran’s diplomatic thrall, and its enemies atomically deterred, the country could pivot from a preparatory strategy of building its alliances and consolidating gains to its real aim—exporting the Islamic Revolution. Its first milestone along this path would be defeating its greatest regional rival and the most direct check on its aspirations: Israel.

All this changed when Hamas launched an unprecedented assault on October 7, resulting in the deaths of over a thousand civilians and the abduction of approximately 200 hostages into Gaza. The attack was a severe miscalculation—a classic, and likely historic, error of warfare.

On October 6, Hamas knew something about Israel that Israel didn’t know about itself—the Jewish state had grown complacent and strategically self-assured. Enamored with its own wonderfully variegated story—the Startup Nation, the cultural hub of Tel Aviv, the military might of the IDF—and distracted by domestic upheaval, Israel was lulled by a combination of comfortable ease and political exhaustion into sleeping in the guard booth. Even more fatally, Israel had bought into a myth that Hamas had moderated and was more interested in pursuing its own corruption and maintaining its grip on power than in pursuing war.

Hamas knew its enemy. But it did not know itself. It failed to account for the likelihood that its invasion would turn into an orgiastic celebration of barbarism. Hamas’ attack went so far beyond the pale of any kind of military invasion guided by rational strategic objectives that it effectively changed Israel, the enemy Hamas knew, into a completely new and consequently different enemy. Israel no longer functionally consisted of the IDF and political echelon whose actions were predicated on the principle of containment. It was now a nation in the throes of disaster. This was the latent nation inside Israel animated, the nation that has been reared on stomach-churning memories of the helplessness of Holocaust Jews, a nation that had promising itself it would give life and limb to prevent anything like that from ever occurring again. 

Hamas had believed a strong blow would disorient Israel, change up the balance of power, and, with a limited number of hostages dragged back to Gaza, force Israel into a negotiated outcome. But the sheer brutality and scale of the attack lent Israel an implicit understanding that whatever form its response might take, it would have to do to Israel’s enemies exactly what they had done to it: challenge their imagination. 

The problem, however, was the dogma concerning Israel’s military options held that Hamas was so well dug in that a ground invasion would result in catastrophic troop losses for Israel; that Hezbollah’s arsenal of 150,000 rockets, as well as its medium and long-range missiles, would overwhelm Israel’s air defense and destroy critical infrastructure; and that Iran’s hydra-headed network of proxies, along with mostly undefined but still widely touted native Iranian capabilities, presented an insurmountable threat. 

Despite this, Israel has accomplished the impossible. It did in part by subverting (so far) two of the three strategic assumptions. For over 20 years since its rise to power, Hamas has learned time and again that Israel was, until that point, constitutionally opposed to even the notion of a significant ground invasion, let alone a full blown military occupation. Hamas understood from its frequent flare-ups with Israel that while Jerusalem might stomach limited incursions with the aim of blackening the terror group’s eye—“mowing the lawn,” as the Israeli defense establishment called it—the Jewish state had absolutely no appetite for a full-blown ground war in Gaza. What Israel delivered was a full-blown ground invasion supported by the massive use of air power, all undergirded by a persistent campaign of targeted assassinations that decimated Hamas’ leadership.

As a result, Hamas was forced to cede its most valuable strategic edge: asymmetric warfare. It could no longer force Israel into a game of terrorist whack-a-mole, firing rockets and disappearing into his tunnel network or hiding behind civilian institutions like schools and hospitals. Instead, post-October 7, Israel engaged in exactly the type of war Hamas false believed Israel never would, or could, prosecute. It began to systematically dismantle Hamas’ primary strategic asset—its tunnel network—in some cases turning tunnels into subterranean tombs that now house the bodies of hundreds of Hamas fighters. In doing so, it shook off Hamas’ long-conjures illusion that civilian structures that had been commandeered by the terror group were not legitimate, or, indeed, essential military targets. 

The much feared losses that Israel’s citizen army was supposed to have suffered never materialized. The IDF proceeded by meticulously clearing hundreds of miles of tunnels and tens of thousands of booby trapped homes, schools, UN offices, mosques, universities and hospitals. As a result, Hamas has been defeated militarily, its most critical leaders—its political head Ismail Haniyeh, military commander Mohammad Deif, along with dozens of bridge and battalion-level commanders—have been killed by the IDF. Its arsenal is depleted and its supply lines have been cut. Most importantly, the image of a triumphant Hamas of October 7 was betrayed as nothing more than a harbinger of death and destruction for the very people it was supposed to protect.

This was Israel’s first success in its bid to challenge the imagination of its enemies.  With Hamas all but defeated as a military force, Iran lost what had effectively been a strategic pincer against Israel, with Hezbollah in the north and Hamas in the south. This left Hezbollah vulnerable to attack. Without the threat of a two-front war, Israel could focus on the northern front.

What Israel had coming next would not just challenge Hezbollah’s imagination, but put an end to that imagination itself. With the beeper attack on September 17, dozens of Hezbollah fighters were killed and around 1,500 were injured, with the casualties tying up precious organizational resources. Even more crucially, in those devastating moments Israel entered Hezbollah’s decision making cycle to such an extreme extent that (as we’d see over the following two weeks) it actually began driving its enemies decisions. Hezbollah commanders were forced to meet in person—an outcome Israel evidently anticipated as it began eliminating senior Hezbollah commanders, in some cases by the dozen, including the entire command of Hezbollah’s elite Radwan Force. But the knockout blow came on September 28 when Israel dropped 80 tons of bombs on Beirut’s Dahiyeh neighborhood, killing Hezbollah’s longtime leader, Secretary-General Hassan Nasrallah, a famously charismatic leader, had made himself into a symbol of Iran’s Axis of Resistance, his image so ubiquitous that he became nearly synonymous with Hezbollah itself. With senior Iranian Revolutionary Guard figures who served as the ligatures between Iran and Hezbollah already eliminated by Israel over the course of the previous year, it is no longer clear to whom Iran can task with resuscitating its most important proxy.

Iran is now in the position of having to choose between coming to the aid of two of its biggest proxies in their hour of greatest need or saving itself. On October 1, the country launched its second direct attack on Israel, with around 180 ballistic missiles fired at the Jewish state from Iranian territory. There was no significant material damage or even Israeli civilian injuries. In fact, the only harm done was to a Palestinian in the West Bank, who died of shrapnel wounds caused by one of the missiles.

With no discernible impact on Israel’s ability to wage war, the attack was a grave miscalculation, offering Israel the justification it needs to launch whatever may be coming next. But unlike in April, when Iran launched 300 drones and missiles at Israel, Iran is not just vulnerable but desperate. The regime is attempting to fall back on old ways by running into what it hoped would be the open diplomatic arms of the Biden administration. In the lead-up to the General Assembly, Iran telegraphed its desire to restart negotiations, a carrot it dangled in front of both the Obama and Biden administrations for years as a means of gaining concessions. But with only weeks until an election he’s not running in, and as he attempts to fend off claims he’s not fully in possession of his mental faculties, Biden has become the lamest of lame ducks. The chances of him staging a diplomatic push to protect Iran with a new diplomatic deal are now approaching zero.  

Iran is on its own. It has no Hamas and no Hezbollah to buffer it from Israel’s military wrath. There is no ersatz Kissinger-esque regional alignment at hand. At least until the election on November 5, there is only a motivated Israel that has not mere vengeance in mind but proof that the existential threat Benjamin Netanyahu had been warning the world about for decades—and which Iran itself has trumpeted for equally as long—is not only real but far more imminent than almost anyone in Israel realized.

Israel has bankrupted Iran strategically. But for Jerusalem that is not enough. Just as Israel has challenged—indeed, collapsed—the imagination of Hamas and Hezbollah, there is a strong likelihood it’s preparing to do the same to Iran. It’s impossible to know exactly what Israel will do. But whatever Israel has coming, we can surmise it will be cunning, it will be brutally effective and, most importantly of all, it will be part of a sequence of tactical events designed to render a specific strategic outcome. 

On October 7, Iran believed that it was witnessing the dawn of a new order in the Mideast. It was right but for all the wrong reasons. In that moment, with Israel reeling, Iran caught a glimpse of its messianic vision—a region aflame, its enemy in chaos, and the barbarity of its regime ascendant abroad as it has been at home. Like so many apocalyptic fever-dreams, this vision was rooted in folly. It was the hallucination of a strategically inbred ruling class that seduced itself into believing that a massive, potentially existential error was, in fact, its greatest triumph. 

What the Iranian regime failed to recognize is that October 7 galvanized its most fearsome enemy. Israel’s prosperity and security had lulled it into comforting storytelling about its cultural vibrancy and economic success. It’s political woes had distracted it from its central mission of serving as a homeland and safe haven for the Jewish people. But that day woke Israel to its ancient reality.

Iran may believe that it is now retreating strategically, retrenching, and preparing to return the kind of blow it’s received. What’s more likely is that Iran’s many other enemies—including its own population which has suffered for decades under a brutal religious tyranny —smell blood in the water. And after nearly half a century of being mercilessly attacked, they will be ready to strike back. The Islamic Republic is on the edge of a knife. If it doesn’t fall off, it can only be sliced open.