Iran’s response to Israel is a choice between revenge and survival.

Iran’s powerful proxy network across the Middle East is receiving blow after blow from Israel. Israel has dramatically escalated its fight with the Lebanese militia Hezbollah, killing longtime leader Hassan Nasrallah in a series of airstrikes in Beirut on Friday.

Hezbollah is Iran’s most important strategic ally, and a battle that Tehran has financed and nurtured since its founding in 1982 to become what is widely seen as the world’s most heavily armed non-state group. It operates as both an organization and a political organization.

starting from series of acts of sabotage caused an explosion in early September thousands of Hezbollah pagers, Israel has moved from disabling widespread communications of the group to eliminating its most powerful leader and several other senior commanders.

Iran’s generals and supreme leader Ayatollah Khamenei have vowed revenge, but their actions and language so far suggest a more measured response. An all-out war between Israel and Iran would be devastating for the entire region, but it would be especially damaging for Iran, whose economy is already in dire straits and whose oil facilities could be particularly vulnerable to attack. would be large.

Notably, oil prices, which are typically highly sensitive to threats to supply, remain hovering around $70 per barrel for international benchmark Brent crude, one of OPEC’s largest oil producers. This suggests that they are also anticipating a cautious response from Iran.

“Israel’s decisive blow against Hezbollah over the past two weeks has essentially eviscerated the crown jewel of Iran’s regional proxy network,” Behnam Ben Taleburu, a senior fellow at the Foundation for Defense of Democracies, told CNBC.

“Iran’s response options are not good. If the Islamic Republic engages more directly, it will have a direct target on its back. Survival trumps retaliation, especially in a war of attrition. ”

Following the assassination of former Hamas leader Ismail Haniyeh in Tehran on July 31, Khamenei vowed a “blood for blood” response, but this has so far failed to materialize. However, the tone following Nasrallah’s murder was markedly different. The Iranian leader made clear that it was up to Hezbollah itself to choose its response.

“All resistance forces in the region support and support Hezbollah,” Khamenei said on the X social media platform on Saturday. “The resistance forces, led by the honorable Hezbollah, will decide the fate of the region.”

Iran’s economy has suffered from years of crippling Western sanctions and widespread mismanagement and corruption. A long period of high inflation has eroded Iranians’ purchasing power, making it difficult for them to afford daily necessities amid a severe depreciation of the Iranian rial. Regional analysts say the country of about 90 million people cannot afford a war.

Recently elected Iranian President Masoud Pezeshkian has expressed a desire to mend relations with the West and restart negotiations on the Iran nuclear deal, which could theoretically be eased in exchange for sanctions against Tehran. He seemed determined to change this trend. This is to curb the rapidly growing nuclear program.

Pezeshkian, who is often described as a reformist, has reportedly called for restraint in response to Israel’s continued attacks on Hezbollah and Yemen’s Houthi militants. The Houthis, supported by Tehran, also target Israel and Israeli-affiliated vessels in the Red Sea.

“Despite the rhetorical promises of retaliation and Israel’s rapid escalation, Iran is actually showing restraint,” said Sheena Toosi, senior non-resident fellow at the Center for International Policy. said. “Many reformists within the Pezeshiki government argue that Iran cannot afford to wage a war that risks targeting its critical infrastructure.”

Still, more hard-liners in the Iranian government are concerned that Tehran and its nuclear facilities could become its next target and feel a strong response is needed to establish deterrence against Israel.

Iran’s priorities, at least for the time being, are to “build regional It’s like maintaining influence and continuing the war of attrition against Israel’ itself,” Tossi said.

On Monday, Israeli Defense Minister Yoav Gallant suggested that a ground attack on Lebanon could take place within days. It remains to be seen whether such developments could change Iran’s calculations.

Hezbollah said it would appoint a new leader at the earliest opportunity, continued to fire rockets as far as 150 kilometers (93 miles) into Israeli territory, and said its fighter jets were preparing for a possible Israeli ground invasion. He added that Israel continued its airstrikes over the weekend and on Sunday announced it had struck multiple targets in Lebanon.

“What we are doing is the bare minimum… We know that the fighting could be long,” Hezbollah deputy chief Naim Qassem said on Monday, according to Reuters. “We will win just as we won in the face of Israel in the liberation of 2006,” he added, referring to the last bloody war between the two adversaries.

Despite being at a disadvantage, Iran appears committed to maintaining support for its regional proxies.

“It’s very unlikely that Iran will go in front of Hezbollah, but it will stand behind Hezbollah and try to rebuild,” Ali Baez, Iran project director at the nonprofit Crisis Group, told CNBC.

“Iran’s regional deterrence is now broken down. But that doesn’t mean Iran will capitulate and give up. There are other viable strategies other than supporting non-state actors that provide Iran with strategic depth. There just isn’t an alternative.”

Israel, on the other hand, shows no signs of backing down, pushing ahead with a series of tactical victories that have yet to lead to achieving Tehran’s strategic goals of pushing Hezbollah further from its northern border and returning displaced people, although they to my house.

Helima Croft, head of global commodity strategy, said, We suspect that oil market participants will miss this escalation.” said RBC Capital Markets MENA Research in a research note published on Monday.

“Still, it is very difficult to see where this regional conflict will go and whether this is the beginning of the end or the end of the beginning.”